WASHINGTON — NAFCU has completed its analysis of the 2005 Home Mortgage Disclosure Act data recently released by the Federal Reserve, and based on its findings the association concludes that compared with other depository institutions, credit unions tend to make smaller mortgage loans and approve a greater percentage of loans to low- and moderate-income borrowers and minorities than banks and thrifts.
Among NAFCU's findings, for all mortgage loans approved in 2005 for one-to-four-family home purchases, the average loan size by banks was more than 50% greater than the average loan size by credit unions. The average loan size by thrifts was almost 100% larger than CUs'.
In addition, the percentage of mortgage loans under the conforming limit of $359,650 is higher among credit unions compared to other depository institutions. The percentage of credit union mortgage borrowers with applicant income of $40,000 or less is higher among CUs.
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For the second year, the HMDA data include information on the interest rates charged on loans and give the spread between the APR and an applicable Treasury security yield. If the difference between the APR and the Treasury yield was less than three percentage points for a first-lien loan and less than five percentage points for a subordinated-lien loan, there was no reporting requirement.
According to NAFCU, credit unions had a significantly smaller percentage of loans with this reporting requirement than banks and thrifts. This was also true for applicants with less than $40,000 in household income and those of minority status.
NAFCU President/CEO Fred Becker said the data show, "credit unions are less likely to charge high interest rates on loans to low-income and minority borrowers, exactly what you would expect from institutions that have as part of their mission to provide low-cost services to those Americans who need them most."
NAFCU also found that when reviewing mortgage approval rates for households with less than $40,000 in income, credit unions approved a higher percentage of loans than other depository institutions. This was also the case with minority households with incomes of less than $40,000.
Becker further observed that the applicant denial rate at CUs is half that of banks–12.5% versus 25%. Credit unions also have a higher percentage of borrowers below the HUD 80% threshold, and their denial rate is significantly lower for this group of borrowers. –[email protected]
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