The $341 million Consumers Credit Union, headquartered in Kalamazoo, Mich., has become the latest CU to start offering its members mortgages insured by the Federal Housing Administration.
According to the NCUA, as of Sept. 20, Consumers had close to 1,100 first mortgages outstanding worth close to $133 million. It had modified 36 first mortgage loans worth roughly $6.5 million by the same date.
Relatively few CUs have taken the leap to start offering FHS mortgages, dissuaded in part by regulations and requirements surrounding the program and by the perception that relatively few of their members would be attracted to mortgages insured by the government.
But Kathi Vlachos, mortgage manager at Consumers, said her credit union took the leap to FHA after its members and the public at large-potential members for the credit union's community charter-started asking for FHA-backed mortgages.
"A number of our members started asking for the loans," Vlachos said, particularly older members who were often asking on behalf of children or grandchildren they wanted to help with the purchase of their first home, she explained.
FHA-insured loans often have more lenient allowances for family members, such as parents or grandparents, to help with the down payment or closing costs. In addition, compared to privately insured loans mortgages, which often require a 5% or even higher down payment, FHA-backed loans require only 3.5% as a down payment.
"FHA mortgages can benefit virtually any homebuyer needing a low down payment home loan," Vlachos explained. "And, because the loan is backed by the federal government, we're able to provide financing to buyers with varying circumstances and sometimes challenged credit."
Vlachos, who had a strong history with mortgages before she came to the credit union, said Consumers wanted to add FHA-backed loans as part of the overall effort to ramp up, streamline and modernize its mortgage lending program. Like the rest of the country, she said the credit union's community had also seen a drop in home prices, but that prices in the area had seemed to stabilize.
FHA-backed loans are also good for the CU's members because they allow for the sellers of the home to contribute up to 6% of the home's price toward the closing costs of the property. This can help properties that had been considered hard to sell in the market to move more quickly.
Other FHA benefits include 100% mortgage insurance for the mortgage issuer, a streamlining approach which makes for an easier application and the use of nontraditional credit history to qualify borrowers and underwrite loans.
Vlachos pointed out that FHA had also taken steps to make its insured loans more competitive with privately insured loans, including getting rid of requirements that sellers had to make minor repairs to their property to make it eligible for FHA-backed loans and allowing both buyers and sellers to contribute to a property's closing costs.
Still, Vlachos acknowledged that getting to the point where Consumers handled the whole origination process for FHA-backed loans was still in the future. Currently, the credit union has qualified those of its staff who have been the most successful in mortgage origination to take applications for FHA-backed loans. But the other details of originating Consumers' FHA-backed loans remains with a third-party mortgage vendor until the credit union finishes the rounds of training necessary to qualify more of its staff in the full process of originating FHA-backed loans, Vlachos said.
But even with the extra effort, Vlachos maintained that offering the FHA loans was worth it. Given the instability around the real estate market and economy, FHA-backed loans seemed likely to retain their popularity among many credit union members and the public at large, particularly first-time homebuyers who might also be first-time credit union members.
"Loans to first-time homebuyers can represent an opportunity for us to influence a family's financial decisions, including credit union membership, for years," Vlachos said.