Some larger banks have begun to more aggressively price theirjumbo mortgage loans, but at least one credit union has decided notto be intimidated into leaving that market.

An executive with the 72,250-member, just over $1 billionWorkers' Credit Union, headquartered in Fitchburg, Mass., saidthe credit union had noticed some area banks had dropped theirrates on jumbo loans to match their rates for conventional loans,but had decided that it had the expertise and resources tocompete.

Jumbo housing finance loans are those which exceed Fannie Maeand Freddie Mac's limits for loans that they will purchase forresale in the secondary market. For most of the country that meansloans made for more than $417,000 are jumbo while loans made insome high-cost areas for more than $625,000 are consideredjumbo.

Housing finance analysts have said banks have been loweringtheir rates on these larger loans in an attempt to attractwealthier borrowers and possible cross sell them other bankproducts and services, and Thomas Gray, senior vice president forlending at Workers', said that is what the credit union thought aswell.

“We started noting that the banks started dropping their jumboloan rates from, say, half a percent over their conventional loanrates down to their loan conventional rates or even a littlebelow,” Gray said. “So I went to my CEO to decide aboutwhether we wanted to compete with that and we decided we did.”

Gray said that Workers', which turns 100 years old in April ofnext year, is headquartered to the west of Boston and doesn'tnecessarily have a lot of branches in high real estate valueareas.

But the credit union's field of membership effectively includesthe whole state and part of New Hampshire and Gray said the creditunion sought to serve all of its members.

“We have members who need personal loans of $500 from time totime,” he said, “but we have other members who want $50,000 CDs. Wehave to serve everybody.”

Gray said Workers' has been in conversation with someorganizations that are looking to purchase jumbo loans, though inmost cases they also want the servicing rights and Grayacknowledged Workers' was reluctant to sell those.

But he added the credit union had also found several differentapproaches to hedging its interest rate risks on fixed rate jumboloans and has found member interest in adjustable rate loansincrease as well.

“And those we have always kept on our books,” he noted.

Gray credited what he called the credit union's sophisticatedapproach to asset and liability management and the use of hedgesfor its ability to keep competing in the jumbo market and said thatthe credit union had been preparing for the shift from refinancing existing home finance loans tomaking new ones.

“We just hired two more loan originators to help us meet somedemand in the Boston market,” Gray said. “We wanted to keep up ourjumbo loan effort to give them some tools,” he added.