NEW YORK – Starting in June, community development credit unions will have a new tool to help them make home loans to members with less than perfect credit. The CDCU Mortgage CenterT-the mortgage provider for over 220 member CUs of the National Federation of Community Development Credit Unions- has partnered with CU Partners to develop Credit Builder. The federation plans to formally announce the new program at its annual conference June 8-11 in San Francisco. Unlike other subprime loan programs which keep a high rate for the borrower for the life of the loan, Credit Builder is designed to allow for automatic rate reductions from .50 to 1 point for members who demonstrate credit worthiness and make timely payments for 24 months. Members who qualify for the lower rate will not have to refinance the loan. The CDCU Mortgage Center was launched earlier this year by the NFCDCU to assist community development credit unions with offering more mortgages and selling mortgages they already made on the secondary market. NFCDCU Executive Director Cliff Rosenthal said many CDCUs are small and don't have the dedicated staff or state-of-the-art mortgage technology capacity to offer mortgages. By joining with two well-known mortgage firms – PHH Mortgage Services on the east coast and CU Partners on the west coast – CDCUs are better able to assist their members with mortgage services. "A credit union should never have to deny a loan that a member could get approval for elsewhere," said Rosenthal, adding that Credit Builder isn't unique to CU Partners. In fact it's originally a Fannie Mae product that Washington State Employees CU beta tested for the Government Sponsored Enterprise under the name Expanded Approval (EA). That product is still marketed by Fannie Mae to credit unions as an option in Desktop UnderwriterT and Desktop OriginatorT. CU Partners VP George Shipman said Credit Builder is designed to motivate and reward credit challenged members for their good payment habits. "It's so critically important for our market that people be migrated to better financial products rather than shunted down to a product that's nothing more than what the market will bear," he said. "Basically what we're saying to the member is we'll get you the lowest rate you qualify for now, and as your credit improves we'll lower your rate. It's an incentive to the member and reinforces the right message," he added. Rosenthal stressed that, "Being low income is not synonymous with being credit challenged and having a bad credit history. Still there are a lot of people in the low-income community who have low FICO scores. "These are people whose lives we're trying to improve, and Credit Builder provides them a way to improve their FICO score," Rosenthal said. Shipman, who used to work at Washington State CU as VP of Mortgage Lending and was also EVP of the CU's CUSO, explained that Credit Builder's automated underwriting system considers more than 300 variables when making a loan determination. All applications are fed into the system and sorted into three categories – one, two and three, with category three being the most blemished. Any application that comes up with anything better than a one, two or three is considered mainstream mortgage lending. Credit Builder is suitable for anyone in the three categories. While the Credit Builder product basically remains the same for all three categories, the pricing will be different, said Shipman, with members in category three getting higher prices than members in the other two categories. What about members whose credit history puts them lower than a category 3? Shipman says they'll receive counseling on what they can do to be able to take advantage of Credit Builder. Shipman said Credit Builder should allow CDCUs to expand their mortgage offering by at least 15-20% to members who would otherwise be turned down for mortgages. "Credit Builder puts mortgages on the radar screen for those CDCUs not able to offer mortgages before," he said. -

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