The 84,000 member, $1.2 billion NASA Federal Credit Union andthe 4.2 million member, $52.4 billion Navy Federal Credit Union areoffering members mortgages without requiring any down payment ormortgage insurance, credit union executives confirmed.

No money down mortgages were among the types of housing finance loans that were blamed for having helped causethe housing finance crisis in 2007 and such mortgages would seem torun counter to the prevailing trend in housing finance regulationwhich seeks to make sure participants in all parts of the lendingprocess have a stake in the loan.

But executives from both credit unions said a mixture ofunderwriting standards and member relationships protect them fromlosses on the loans.

NASA FCU's vice president of residential lending, Bill White,declined to say what percentage of the credit union's housingfinance lending did not require a down payment, but said that thevolume in the loans was in the millions of dollars. The creditunion booked $170 million in housing finance loans in 2012, Whitereported.

NASA FCU has confidence in the no money down loans because thecredit union underwrites those more tightly than it does loanswhich are underwritten to the standard for the secondary marketrequired by Fannie Mae and Freddie Mac, White explained.

Because no money down loans cannot be sold on the secondarymarket, the credit union's no down payment offerings are destinedfor its own portfolio.

The Maryland-based credit union, which has a nationwide field ofmembership based on SEGs, also limits the no money down housingloans to real estate markets in the credit union's closest region,the Washington, D.C., suburbs, where NASA believes it best knowsthe market and where the credit union is confident housing priceshave hit bottom.

“We focus on the ability to repay the loan as the standardindependent of what might happen to the value of the underlyingasset,” White said, contrasting NASA FCU's no money down loans tothe sorts of no down payment lending which helped fuel the housingfinance crisis.

Those previous no money down loans offered by other financialinstitutions and mortgage brokers had been made on the assumptionof rising real estate values, he explained, but NASA's programfocused on ability to repay.

But if a member had the financial wherewithal to be able toeasily repay the loan, why would they necessarily want a no moneydown mortgage?

White explained that some members were financially able to makemortgage payments, but were interested in not tying down liquidassets in housing finance.

He also explained that the loans carried an interest ratepremium and that members understood they would pay a slightlyhigher interest rate because they had not put any money down.

NASA FCU had run the program past NCUA for risk and White saidthat after 36 months offering the loans, there had been no problemswith delinquency. “These loans work well for the credit union andour members,” he said.

Navy Federal, by contrast, offers what it calls the HomebuyersChoice to all its members and doesn't underwrite the no money downloans differently, according to the housing finance executives withthe largest credit union.

“We underwrite all of our loans so our members can succeed withthe loan,” said Katie Miller, vice president for mortgage products for NAVY,adding that the no money down loans are extremely popular withmembers who might not be able to come up with a $20,000 downpayment for a conventional mortgage from another lender.

The credit union also makes $2,500 available to members to helpwith closing costs and the loans allow up to 6% of the purchaseprice to come from the seller, according to the credit union'swebsite.

Miller and Richard Morris, vice president of mortgage pricingand GSE relationships, put the loans in the context of therelationship Virginia-based Navy Federal has with its members.

“We know and trust our members and we believe they knowand trust us,” Morris explained. “It really is all about ourmembers. They understand how the credit union seeks to help themand they want to help the credit union too.”

Miller said the credit union had offered the no money downmortgages prior to 2008, but then put the program on a “hiatus”until February 2010 in order to reexamine and evaluate the loanportfolio. Subsequently they began to offer the loans again, shesaid, and report the loans perform very well.