Non-traditional mortgages are gaining at savvy credit unions and causing first mortgage originations to climb.
But to make it work, you’ve got to get creative, say some of the industry’s most successful real estate lenders.
Much of their progress stems from different new approaches to the mortgage product, usually some variation of an adjustable rate mortgage (ARM). Overall, ARMs accounted for $23.4 billion or 40.1% of all credit union first mortgages, according to year-end data from Callahan & Associates.
State Employees Credit Union in Raleigh, North Carolina, with $12.5 billion in assets, for example, was the most successful last year with $1.8 billion in new mortgages originated in 2004 thanks to a unique two-year ARM. The niche product protects the member but is still balance sheet friendly as it can only adjust one percent every two years with a lifetime cap of eight percent above the initial rate.
Columbia Credit Union in Vancouver, WA, with $687 million in assets, is justly proud of its record. It ranks 40 th in mortgage originations in the credit union industry with $89.5 million in ARMs produced in 2004, a hike of 31.9% in one year.
The credit union offers two niche mortgage products:
- The first is a 15-year balloon mortgage, which amortizes at a 30-year rate. “The assumption is that the member will not stay in the house for more than 15 years,” said Cindy Campano, assistant vice president of real estate lending. “It is one of our best performing products.”
- The second is a 7/1 adjustable rate mortgage with no private mortgage insurance. “We approve members with A and B credit ratings up to 95% loan-to-value. It can be used for purchases, limited cash out and refinances,” she said. Columbia Credit Union also offers interest-only, jumbo and 40-year mortgages. “Our interest-only product is currently more popular than our 40-year product, but the reverse is true at another credit union in our region,” added Campano.