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PHOENIX – First it was interest only lines of credit to purchase primary residences, and then it was to purchase vacation homes. Now Desert Schools FCU has further extended its interest only lines of credit to its members to purchase investment property. The $2 billion credit union says it’s the first credit union in the Valley to provide this type of home equity product to its members which number 296,000. VP of Lending Robin O’Rorke says the product announcement is the latest phase of Desert Schools interest only line of credit offering. About six months ago it began offering the product to members to purchase primary residences, then shortly after it expanded it to vacation homes. Desert Schools’ home equity loan numbers speak to the popularity of the product. In June the credit union did over $53 million in new home equity lines of credit, and about 30% of those were for the interest only product. Last month, Desert Schools did $94 million in mortgage originations, which O’Rorke says is the most originations the CU ever did in its 65-year history. Its total mortgage portfolio is $745 million. “In a housing market like the one we’re experiencing here where prices keep going up, the interest only line of credit gives our members the power to afford more home,” says O’Rorke. “It’s just one more product they have to choose from among all the mortgage products we offer.” Desert Schools is a Fannie Mae seller/servicer, and it offers about 150 different types of first mortgage products. It doesn’t offer Fannie Mae’s 40-year mortgage. “If you look at an amortization table, the balances on 30 and 40 year mortgages don’t go down very fast after 10 years. With members so concerned about cash flow, the interest only home equity product lets them manage their money a little easier,” says O’Rorke. In addition to the low fees involved with the product – $495 for Desert Schools’ processing fee plus additional third-party fees for things like flood and title insurance, escrow fee and appraisals – the home equity line of credit does not require private mortgage insurance and provides a 90% loan-to-value for residential property. The maximum line of credit Desert Schools is offering on the product is $350,000. On that size loan at 6% interest based on prime, O’Rorke says the monthly payment would be about $1,750. That compares, he says with a $2,098 monthly payment on a regular loan. So there’s a savings of about $348 a month or $4,100 over a year. Although Desert Schools had only been offering the interest only home equity line of credit for investment property about four weeks at press time, O’Rorke says there was already a lot of interest among members. He said Desert Schools is expecting a lot of interest in the product because of the “robust local” housing market and the competitive features of the product. -

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