Your Best Rate May Be Hiding Right Under Your Nose!
Posted 02-07-2015 at 03:38 PM by SmartMoney
When you think about borrowing, what is the first thought that comes to mind? If it’s your bank, you are thinking like the majority of America. Need a loan? Let’s face it, most of us think about borrowing the same way we think of our dentist…..we don’t want to be there. I recently had an oh-so-obvious light bulb go off, one that should have always been shining bright. But the bulb was dim, and I credit that to the fact I have worked for banks in my entire 30 year career. (We won’t count the one job for 10 months working for a mortgage banking office without depositors). I can tell you, I am not the only one that was reaching for the bank and not even thinking about anywhere else.
In the past decade, I have lost many mortgage loan applications (including my own brother’s) to a credit union. I never really thought about it and dismissed it as “you can’t win them all.” So, the really good loans, the ones everyone wants, they went to whoever offered the best rate. So I became good with challenging loans (all the good ones were going to credit unions). And along comes two names that my industry really has heartburn over, “Frank and Dodd.” (I agree we had to do something, but they went way too far). The most glaring result (to me, at least), portfolio money dried up, almost overnight. And for the past 5 years, I’ve been known in the real estate community for portfolio lending, finding the niches in our market. One bank hired me, knowing I was coming on board for their portfolio money. They “forgot” to tell me the week before I started that they pulled the plug on portfolio lending. (See, now banks are required to have skin in the game, or assets set to a certain percentage of what they have loaned out, as well as, they are responsible that all loans are done correctly, regardless who originated them). So, shame on that bank, I’m a single mom and still to this day, paying for their deception. But boy have I moved on.
I started looking for a new home not long after I started at that bank, and credit unions kept popping up on my radar. Most, not all are 100% portfolio, but their rates were incredibly low. Kind of too low to believe. I spent almost two months interviewing where I finally landed. I had to make sure they thought like a mortgage bank did (example: I could reach someone after hours). I had to make sure the pay was competitive. I had to make sure they were open to new ideas. I had to make sure their rates weren’t going to go up right after I started.
About two months after I started, I saw a report that was my wake-up call. And in that report, a single phrase put all the pieces together for me. It wasn’t a new phrase, I knew this, but this is what had the bells ringing: NON PROFIT. Credit unions are not for profit, but for the benefit of their members. We do not have a paid Board of Directors, we do not have stockholders to please, we are not Wall Street. The last time I looked, the average bank that takes in a loan and sells, it makes on average 2.375% - this doesn’t even include the profit they make if the market improved since you closed. So, those savings go back to you, the member. This can mean quite a difference in rate. For example, if someone is buying using 80/10/10 financing, the mortgage banking norm is to charge an additional 1.25% in points (which equals anywhere from 1/8% to ¼% more in rate on the first trust). Those savings are in addition to other savings already in place. I recently was price-checked by a borrower and my rate was lower by 7/8%. Now your mileage may vary, your credit union may not offer the same products. But credit unions can do loans that don’t fit in the narrow Dodd/Frank box. (Please do not confuse portfolio with risk-taking). We are not public, we play by different rules.
Now, I am not saying credit unions don’t have their quirks – everyone does. But as credit unions catch on to the fact the banks are on steroids with their loan approval conditions, more and more credit unions are finding the real estate market awfully tempting and they are expanding across the United States.
Many credit unions, such as mine, are easy access membership, meaning you can join a non-profit association and that membership will entitle you to a specific credit union membership. And seeing that you get to keep your minimum share deposit ($5 -$50), it’s your money, most cost no more that a one-time charge of $25. As one customer put it, “I made that up 4 times over in my first month's payment.” He probably did not realize it, but his closing costs were probably at least $500 (at least) cheaper than a mortgage banker. So, I ask you, are you willing to go through the extra effort to save a lot of money?
In the past decade, I have lost many mortgage loan applications (including my own brother’s) to a credit union. I never really thought about it and dismissed it as “you can’t win them all.” So, the really good loans, the ones everyone wants, they went to whoever offered the best rate. So I became good with challenging loans (all the good ones were going to credit unions). And along comes two names that my industry really has heartburn over, “Frank and Dodd.” (I agree we had to do something, but they went way too far). The most glaring result (to me, at least), portfolio money dried up, almost overnight. And for the past 5 years, I’ve been known in the real estate community for portfolio lending, finding the niches in our market. One bank hired me, knowing I was coming on board for their portfolio money. They “forgot” to tell me the week before I started that they pulled the plug on portfolio lending. (See, now banks are required to have skin in the game, or assets set to a certain percentage of what they have loaned out, as well as, they are responsible that all loans are done correctly, regardless who originated them). So, shame on that bank, I’m a single mom and still to this day, paying for their deception. But boy have I moved on.
I started looking for a new home not long after I started at that bank, and credit unions kept popping up on my radar. Most, not all are 100% portfolio, but their rates were incredibly low. Kind of too low to believe. I spent almost two months interviewing where I finally landed. I had to make sure they thought like a mortgage bank did (example: I could reach someone after hours). I had to make sure the pay was competitive. I had to make sure they were open to new ideas. I had to make sure their rates weren’t going to go up right after I started.
About two months after I started, I saw a report that was my wake-up call. And in that report, a single phrase put all the pieces together for me. It wasn’t a new phrase, I knew this, but this is what had the bells ringing: NON PROFIT. Credit unions are not for profit, but for the benefit of their members. We do not have a paid Board of Directors, we do not have stockholders to please, we are not Wall Street. The last time I looked, the average bank that takes in a loan and sells, it makes on average 2.375% - this doesn’t even include the profit they make if the market improved since you closed. So, those savings go back to you, the member. This can mean quite a difference in rate. For example, if someone is buying using 80/10/10 financing, the mortgage banking norm is to charge an additional 1.25% in points (which equals anywhere from 1/8% to ¼% more in rate on the first trust). Those savings are in addition to other savings already in place. I recently was price-checked by a borrower and my rate was lower by 7/8%. Now your mileage may vary, your credit union may not offer the same products. But credit unions can do loans that don’t fit in the narrow Dodd/Frank box. (Please do not confuse portfolio with risk-taking). We are not public, we play by different rules.
Now, I am not saying credit unions don’t have their quirks – everyone does. But as credit unions catch on to the fact the banks are on steroids with their loan approval conditions, more and more credit unions are finding the real estate market awfully tempting and they are expanding across the United States.
Many credit unions, such as mine, are easy access membership, meaning you can join a non-profit association and that membership will entitle you to a specific credit union membership. And seeing that you get to keep your minimum share deposit ($5 -$50), it’s your money, most cost no more that a one-time charge of $25. As one customer put it, “I made that up 4 times over in my first month's payment.” He probably did not realize it, but his closing costs were probably at least $500 (at least) cheaper than a mortgage banker. So, I ask you, are you willing to go through the extra effort to save a lot of money?
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