Low- and moderate-income members of the $1.2 billion UW Credit Union now have an additional option for getting a mortgage, one which might enable them to obtain a loan underwritten and sold by the credit union.
Offered by UW in partnership with the Wisconsin Home and Economic Development Authority, the new WHEDA Fannie Mae Advantage Mortgage offers up to 100% financing on 30-year fixed rate loans for first-time home buyers.
WHEDA is a state authorized housing authority that underwrites and funds mortgages with money it generates from the sale of bonds.
The borrowers will not be required to purchase private mortgage insurance and the loans carry eligibility guidelines that vary from county to county, the credit union said.
"This is an accessible, affordable program for first-time home buyers," said Paul Kundert, president/CEO of UW Credit Union. "We are proud to partner with WHEDA to offer it. It demonstrates our continued commitment to providing affordable credit to first-time home buyers and people at all income levels."
Under the terms of the partnership, the credit union underwrites the loans under WHEDA guidelines and, provided the guidelines are met, WHEDA agrees to buy them and service them immediately. The new product represents the latest collaboration in what has already been a longstanding relationship between the two organizations, UW executives said.
"I guess we have offered different WHEDA mortgage loans for about 15 years," said Julio Rios, director of mortgage operations. He added that WHEDA named the credit union as its top producing mortgage lender in Dane County, where the CU is headquartered, in 2006 and 2007.
"One of the ways that we are different from other credit union mortgage lenders is that the percentage of our loans, generally, that come from purchase money is quite high, often 70%," Rios explained. "The relationship with WHEDA has helped position us to become a first option mortgage lender for many of our members."
Purchase money refers to mortgage loans made to actually purchase property, as opposed to refi loans, which are made to refinance previously existing mortgages. The latter tend to be a larger part of most credit union mortgage business; Rios said they were 80% of UW's business last year when the market for purchase money mortgages largely dried up.
Indeed, the partnership with UW represents the first time WHEDA has committed to offer a single family mortgage product in months, after its own sources of funding dried up in 2008.
"The world was very different in October 2008 when we were forced to shut down our program," WHEDA Executive Director Antonio Riley said in announcing the organization's return to the single family home mortgage market. "Times have changed in the 18 months since we last wrote loans. But we're confident that the new product we're offering, the WHEDA Fannie Mae Advantage, is going to meet this new reality as well as the expectations of the marketplace."
Fannie Mae developed WHEDA's Affordable Advantage product exclusively for Housing Finance Agencies as part of an agreement with the National Council of State Housing Agencies, the trade association that represents state HFAs like WHEDA.
"WHEDA is the first HFA nationwide to become a participating member of the agreement and offer the new Fannie Mae Affordable Advantage product," said Carl Riedy, vice president of the public entities channel at Fannie Mae. "Fannie Mae looks forward to continuing our long-standing partnership with WHEDA through this new product."
In addition to financing up to 100% of the loan's value for borrowers with very strong credit scores and not requiring private mortgage insurance, the Affordable Advantage mortgage offers fixed 30 year rates of interest, as little as $1000 out of pocket and reduced fees and even six months of job loss insurance.
"We're realistic that credit is tighter to get these days. We know that we won't be able to serve necessarily the same folks as in the past. But we think Fannie Mae's Affordable Advantage product is going to be the right tool the state needs to get people into safe, affordable home ownership," Riley said.
Rios said UW expects the Affordable Advantage loans to make up between 10% and 15% of its mortgage business in 2010.