LOS ANGELES -- Los Angeles FCU here didn't need a Federal Reserve rate cut to offer a great deal on Home Equity line of Credit loans (HELOCs). LAFCU is featuring a 3.49% introductory rate for six months and a ten-year draw and still finds plenty of takers. With no points and no annual fees, members can finance up to 80% of home value and take advantage of possible tax benefits.
Ron Welcome, assistant vice president of lending for the CU, told Credit Union Times that "we're finding our business to be pretty steady these past few months on HELOCs and second trust deeds. But we are also seeing some denials due to the drop in home values among some members who have refinanced previously."
LAFCU funded $1.3 million in equity lines of credit in December 2007, Welcome reported. That was a big year-end spike compared to November--which pulled in just $608,000--and October, which netted $750,000.
"We tried to book as much as possible for the year-end," Welcome said. "Looking down the pipeline, it doesn't look nearly that good." The HELOC program is important to LAFCU because it doesn't have any first mortgage business. "We don't do purchase loans because it seems that the real estate agents and mortgage brokers direct buyers to Countrywide or Bank of America. And real estate in the LA area is very competitive," he said.
But Welcome said that the CU is beginning to re-think that limited menu, especially since the mortgage meltdown has brought so much attention to poorly underwritten loans that have gone bad. "It would be a good thing to pump up our efforts to do firsts and we're looking into that," he said. "Our members are always asking whether we sell our loans or not and given all the bad publicity around selling mortgages, they express a preference in having someone to talk to that's local--where the loan stays local. They'd like to see their mortgage stay here."
Welcome said that even if a mortgage is sold to the secondary market, the CU would likely retain the servicing in order to keep that connection real to members. But he lamented that given the opportunity to make hay out of banker-associated woes in the real estate downturn, so many credit union members are still not aware of the CU option, whether for mortgages or other products.
"It's still unfortunate that many people still don't know what credit unions are or what they do," he said.