Whereas Banks and Financial savings and Mortgage establishments nationwide have been busy lining as much as the general public trough for bailout funds, one other establishment has been busy writing house mortgages, your neighborhood credit score union! Shocked? Do not be, since credit score unions have been writing house mortgages for years- they only have a special enterprise mannequin than the large boys.
Credit score unions are non-profits that exist to earn cash, simply not revenue. Their primary marketing strategy is easy: credit score unions obtain deposits, and use that cash to make loans. They then cost extra on these loans than is paid on deposits. Ta-Da! A enterprise that thrives. And naturally, they’re very conservative in the case of their lending requirements. Subprime and possibility ARM mortgages have by no means been of their portfolios, nor did they promote and repackage loans as investments on the secondary market.
What credit score unions did do is mortgage solely to credit score worthy members on mortgages that actually weren’t higher than what the member might afford. In addition they did this with out creating fraudulent purposes and wildly inflated appraisals-just like banks used to do within the previous days!
Becoming a member of a credit score union is usually based mostly on membership necessities comparable to dwelling in a sure space, working for a specific employer or trade, or belonging to a sure group. The most important benefit of credit score union membership is that mortgage charges are decrease and returns are higher on financial savings and CD’s than normally discovered at banks. Not like banks, credit score unions are member owned with extra earnings both handed again to members within the type of decrease charges, higher earnings, or shares paid.
They maintain most loans to maturity, and fewer than 1% of credit score union mortgages are 60 or extra days late in line with the Credit score Union Nationwide Administration (CUNA). Whereas their mortgage enterprise is a fraction of that of different mortgage lenders, credit score union originations elevated 10% within the first 6 months of 2008 (in line with CUNA), whereas mainstream lender originations dropped 18% throughout the identical interval as reported by the Mortgage Bankers Assn.
Not stunning, with automotive gross sales down and the problem sellers are having arranging financing, particularly for the used automotive market, credit score unions are greater than prepared to as soon as once more step as much as the plate to help. Consequently, credit score union membership is rising by leaps and bounds, all due to sound enterprise practices.