Credit unions of­fer­ing mort­gage deals.

Mem­bers can get no-down-pay­ment home loans and help with closing costs.

Los Angeles Times - - BUSINESS - By Ken­neth R. Har­ney ken­har­ney@earth­ Dis­trib­uted by Wash­ing­ton Post Writ­ers Group.

WASH­ING­TON — Want to buy your first home with lit­tle or noth­ing down and maybe get a re­fund on part of your re­alty agent’s com­mis­sion?

Here’s one way: Con­sider join­ing a credit union that is ag­gres­sively ex­pand­ing its mort­gage busi­ness. Credit unions have been in­creas­ing their pres­ence in hous­ing — more than qua­dru­pling their share of to­tal mort­gage mar­ket vol­ume in the last nine years, ac­cord­ing to the Na­tional Assn. of Fed­eral Credit Unions — by of­fer­ing deals you sim­ply can’t find at most banks.

Case in point: The coun­try’s largest credit union, Navy Fed­eral, closed more than $1 bil­lion in home pur­chase loans dur­ing the month of March alone.

But what’s re­ally ex­tra­or­di­nary is that 59% of the loans went to first-time buy­ers, and two-thirds of those first-timers were from a de­mo­graphic slice that has been miss­ing in ac­tion for years — bor­row­ers ages 18 to 34. The his­tor­i­cal norm for first-time buyer par­tic­i­pa­tion in home pur­chas­ing is around 40% but cur­rently is just 28% to 29%, ac­cord­ing to the Na­tional Assn. of Re­al­tors.

So how is Navy Fed­eral pulling in hordes of young first-timers? By of­fer­ing loans that ad­dress their needs — zero-down pay­ments, no pri­vate mort­gage in­sur­ance pre­mi­ums, plus the stan­dard low-down­pay­ment menus of the Fed­eral Hous­ing Ad­min­is­tra­tion (3.5% min­i­mum) and the Depart­ment of Vet­er­ans Af­fairs (zero min­i­mum) loans.

Navy Fed­eral also is tap­ping into a mas­sive membership base of 5 mil­lion mem­bers world­wide and adding young new mem­bers quickly: It’s open to all branches of the armed ser­vices, ac­tive and re­tired, civil­ian em­ploy­ees, con­trac­tors and a wide range of rel­a­tives. Even “co­hab­it­ing part­ners” are el­i­gi­ble for membership.

Navy Fed­eral’s first-time buyer fo­cus is hardly unique. Other credit unions are run­ning pro­grams with tempt­ing terms.

North Carolina’s State Em­ploy­ees’ Credit Union of­fers qual­i­fied mem­bers up to 100% fi­nanc­ing on mort­gages as large as $400,000 with no pri­vate mort­gage in­sur­ance pre­mium pay­ments. The in­ter­est rate as of mid-April: 4.25% on a 30year term that has a rate ad­just­ment af­ter five years. For buy­ers who need help on closing costs, the pro­gram can lend them an ad­di­tional $2,000, push­ing the loan-to­value ra­tio be­yond 100%.

NASA Fed­eral Credit Union, which is open not only to NASA-re­lated em­ploy­ees but to mem­bers of 900 “part­ner” com­pa­nies and as­so­ci­a­tions, of­fers zero-down mort­gages up to $650,000 with no pri­vate mort­gage in­sur­ance plus a $1,000 “lender credit” to­ward closing costs if the home pur­chase doesn’t go to set­tle­ment by the con­tract date.

Still other credit unions help new home buy­ers with their ex­penses by re­fund­ing por­tions of real es­tate agents’ com­mis­sions. The Boe­ing Em­ploy­ees’ Credit Union, which is open to all res­i­dents and work­ers in the state of Wash­ing­ton — not just Boe­ing em­ploy­ees — gives pur­chasers the op­tion of re­ceiv­ing a 20% cash re­fund of their real es­tate agent’s com­mis­sion plus a $250 credit to­ward mort­gage closing costs.

But here’s a key ques­tion: Are credit unions that of­fer come-ons like th­ese in­creas­ing their risk of de­faults and losses? Coun­ter­in­tu­itive though it might seem, credit union home­pur­chase pro­grams gen­er­ally have mi­nus­cule delin­quency and de­fault rates.

Katie Miller, vice pres­i­dent for mort­gages at Navy Fed­eral, said its se­ri­ous delin­quency rate as of March on its en­tire port­fo­lio was 0.57%. Sta­cie Walker, se­nior vice pres­i­dent for loan orig­i­na­tion at North Carolina’s State Em­ploy­ees’ Credit Union, said its port­fo­lio of zero-down pay­ment, first­time buyer loans “ac­tu­ally per­forms bet­ter” than the en­tire mort­gage port­fo­lio, though she did not have spe­cific fig­ures on hand.

“We know our mem­bers,” Miller said, adding that Navy Fed­eral has been fol­low­ing “abil­ity to re­pay” un­der­writ­ing guide­lines for years, well in ad­vance of con­gres­sional man­dates for all lenders to do so af­ter the mort­gage cri­sis of the last decade.

Credit unions’ rapid growth — they now have about 100 mil­lion mem­bers — hasn’t gone un­no­ticed by banks and mort­gage com­pa­nies who com­pete against them. Robert Davis, ex­ec­u­tive vice pres­i­dent for mort­gage mar­kets at the Amer­i­can Bankers Assn., says large credit unions get an un­fair break — they es­sen­tially func­tion like banks, but they have lower costs be­cause as not-for-profit, mem­ber-owned in­sti­tu­tions, they are ex­empt from fed­eral tax­a­tion.

But if you’re a first-time buyer, tax pol­icy is­sues prob­a­bly don’t con­cern you. You just want the low­est­cost op­tion for a mort­gage. Not all credit unions of­fer at­trac­tive loan deals, but many do. To check out credit union membership pos­si­bil­i­ties in your area, go to­

Ro­ge­lio V. So­lis As­so­ci­ated Press

SOME CREDIT UNIONS help new home buy­ers with their ex­penses by re­fund­ing por­tions of real es­tate agents’ com­mis­sions. Above, a home in Jack­son, Miss.

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