Details :
State Employees Credit Union of Raleigh, North Carolina, $15.8 billion assets, identified members who were likely to have a subprime loan. They sent out 118,000 letters and refinanced $225 million of loans that were mostly from subprime mortgages. Many of the members could have qualified for conventional loans, why did they choose a subprime mortgage?
“Perhaps they were misled, dealing with a realtor, or they had a good relationship with a broker who did a good job of selling services,” said Phil Greer, SVP loan administration. “They were sold a bill of goods. Half of the people that took out a subprime qualified for a prime loan, according to a Fannie Mae study.”
The credit union’s mortgage loan volume is twice what it was a year ago, but the market has changed. “The remaining lenders are more reputable, consumers are more aware of the need to get second opinions, and are turning to lenders they can trust.”
State Employees also has an automatic savings program whereby they add 10% to the mortgage amount of the fixed rate loan, which is then deposited as a Certificate of Deposit, which pays the same rate as the loan. The interest is paid monthly, compounded over 10 years over the life of the CD. Both the home and the CD serve as collateral for the loan.
The member can use the CD to pay down on the mortgage, use it for college expenses for children, or supplement retirement funds. The funds can’t be accessed for 10 years unless the home is sold and the loan is paid off. The program was introduced one year ago and 28 loans totaling $3.2 million were disbursed to date.
“Perhaps they were misled, dealing with a realtor, or they had a good relationship with a broker who did a good job of selling services,” said Phil Greer, SVP loan administration. “They were sold a bill of goods. Half of the people that took out a subprime qualified for a prime loan, according to a Fannie Mae study.”
The credit union’s mortgage loan volume is twice what it was a year ago, but the market has changed. “The remaining lenders are more reputable, consumers are more aware of the need to get second opinions, and are turning to lenders they can trust.”
State Employees also has an automatic savings program whereby they add 10% to the mortgage amount of the fixed rate loan, which is then deposited as a Certificate of Deposit, which pays the same rate as the loan. The interest is paid monthly, compounded over 10 years over the life of the CD. Both the home and the CD serve as collateral for the loan.
The member can use the CD to pay down on the mortgage, use it for college expenses for children, or supplement retirement funds. The funds can’t be accessed for 10 years unless the home is sold and the loan is paid off. The program was introduced one year ago and 28 loans totaling $3.2 million were disbursed to date.
