Credit union question

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Railroader
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Credit union question

Post by Railroader » Wed May 06, 2015 10:19 am

I want to join a credit union near my house and possibly refi with them. I'm concerned with their size. They have only one office, but shared branching with 40 other credit unions in the area. I do not really know what this means but should I be a concern? Also it says their home loans are through Federal Home Loan bank. Is this a good option? Thanks

alex_686
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Re: Credit union question

Post by alex_686 » Wed May 06, 2015 10:24 am

I would be concerned with rates and the level of service.

Most CU have to be small so sharing branch offices is one way to feel bigger. I can't see why this is would be a issue.

Most mortgages get bundled up and put in CMOs. For most banks this means Freddie Mac or Fannie Mae. No real difference here.

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prudent
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Re: Credit union question

Post by prudent » Wed May 06, 2015 10:43 am

Shared branching means you can to go the other CU branches and make a deposit, a payment, or withdrawal just as though you were doing it at your home CU. A benefit, for sure. You'll always need your account number and ID.

I would not hesitate to use a small CU for loans.

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friar1610
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Re: Credit union question

Post by friar1610 » Wed May 06, 2015 10:45 am

alex_686 wrote:I would be concerned with rates and the level of service.

Most CU have to be small so sharing branch offices is one way to feel bigger. I can't see why this is would be a issue.

Most mortgages get bundled up and put in CMOs. For most banks this means Freddie Mac or Fannie Mae. No real difference here.
I have dealt with 2 credit unions during my lifetime. Both are large. (One of them, Navy Federal Credit Union, is/was the largest in the country.) So take what I say with a grain of salt as it may not apply to small ones.

Many credit unions hold onto their mortgages and do not sell them, so they don't end up bundled.

Check and see if the credit union you are considering is Federally chartered or state chartered. If it is Federal, it will be insured by the NCUA which is the credit union analog of the FDIC. That's a good thing. I honestly don't know how state chartered CUs are insured but if yours is state, you might want to make sure you understand it.

I have found the mortgage rates at my CUs to be very competitive and have had several mortgages with them in the past. Similarly, rates on CDs (CUs sometimes call them "share certificates") are often a smidge above banks. (CUs are technically non-profit and they have some advantages over banks which allow them to be a wee bit more generous. They don't have stockholders per-se as their owners are their customers.)
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Christine_NM
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Re: Credit union question

Post by Christine_NM » Wed May 06, 2015 10:47 am

Look up the credit union on bankrate.com.
16% cash 48% stock 36% bond. Retired, w/d rate 2.85%

alex_686
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Re: Credit union question

Post by alex_686 » Wed May 06, 2015 12:29 pm

friar1610 wrote:Many credit unions hold onto their mortgages and do not sell them, so they don't end up bundled.
I would agree that most CU hold onto the servicing of the loan, unlike some of their bank counterparts. But how would you determine this if the CU actually held onto the loan? From a customer viewpoint it would be impossible to tell if they had sold your mortgage along. One could read the CU financials and see how much in 1st mortgages they hold as assets, but that won't tell you how much they have sold along.
friar1610 wrote:CUs are technically non-profit and they have some advantages over banks which allow them to be a wee bit more generous.
Technically they are "not for profit" , which a bit different than a non-profit. However, I would agree that they have a different ethos than most banks.

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Re: Credit union question

Post by The Wizard » Wed May 06, 2015 12:38 pm

alex_686 wrote:
friar1610 wrote:Many credit unions hold onto their mortgages and do not sell them, so they don't end up bundled.
I would agree that most CU hold onto the servicing of the loan, unlike some of their bank counterparts. But how would you determine this if the CU actually held onto the loan? From a customer viewpoint it would be impossible to tell if they had sold your mortgage along. One could read the CU financials and see how much in 1st mortgages they hold as assets, but that won't tell you how much they have sold along.
friar1610 wrote:CUs are technically non-profit and they have some advantages over banks which allow them to be a wee bit more generous.
Technically they are "not for profit" , which a bit different than a non-profit. However, I would agree that they have a different ethos than most banks.
I refi'd my mortgage with a HELOC at my CU a few years ago.
I do monthly payments to it from my CU checking account each month using their app or their website.
The HELOC is functionally at that CU and that's what really matters...
Attempted new signature...

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BolderBoy
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Re: Credit union question

Post by BolderBoy » Wed May 06, 2015 5:01 pm

You can research this CU a bit: <http://researchcu.ncua.gov/Views/FindCreditUnions.aspx>

I've been in lots of CUs, large and small. Two were destroyed by employee embezzlement (and I think they were taken over by other CUs)

The NCUA is very good at monitoring CUs.

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Re: Credit union question

Post by Traveller » Wed May 06, 2015 5:51 pm

alex_686 wrote:
friar1610 wrote:CUs are technically non-profit and they have some advantages over banks which allow them to be a wee bit more generous.
Technically they are "not for profit" , which a bit different than a non-profit. However, I would agree that they have a different ethos than most banks.
The main advantage is that CUs don't have the tax burden banks do. Also the shareholders are the members (customers) instead of being the general public or private investors. Many people feel that CUs are therefore more motivated to maximize member value instead of investor value. CUs generally (certainly not always) get better scores for customer service for retail customers like you (many CUs are not equipped and can be limited in more complex or commercial banking services). The NCUA effectively provides the same insurance protection you'd get at a bank, and they 'enjoy' the equivalent regulatory oversight that banks do. Go for it.

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friar1610
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Re: Credit union question

Post by friar1610 » Thu May 07, 2015 2:26 pm

alex_686 wrote:
friar1610 wrote:Many credit unions hold onto their mortgages and do not sell them, so they don't end up bundled.
I would agree that most CU hold onto the servicing of the loan, unlike some of their bank counterparts. But how would you determine this if the CU actually held onto the loan? From a customer viewpoint it would be impossible to tell if they had sold your mortgage along. One could read the CU financials and see how much in 1st mortgages they hold as assets, but that won't tell you how much they have sold along.
One way to find out would be to just ask. I know some CUs have a policy of holding onto their mortgages. It seems that when I was dealing with NFCU quite a few years ago they said they had never sold a mortgage. That may not be an ironclad guarantee going forward but it's a pretty good indication of how they do things.
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Re: Credit union question

Post by NOVACPA » Thu May 07, 2015 3:25 pm

friar1610 wrote:
alex_686 wrote:
friar1610 wrote:Many credit unions hold onto their mortgages and do not sell them, so they don't end up bundled.
I would agree that most CU hold onto the servicing of the loan, unlike some of their bank counterparts. But how would you determine this if the CU actually held onto the loan? From a customer viewpoint it would be impossible to tell if they had sold your mortgage along. One could read the CU financials and see how much in 1st mortgages they hold as assets, but that won't tell you how much they have sold along.
One way to find out would be to just ask. I know some CUs have a policy of holding onto their mortgages. It seems that when I was dealing with NFCU quite a few years ago they said they had never sold a mortgage. That may not be an ironclad guarantee going forward but it's a pretty good indication of how they do things.
They most definitely are selling the mortgages. They just may not be selling the servicing rights.

Credit unions are accessing cash from depositors and therefore, they can't have their cash tied up in a loan since deposits are demand accounts and CUs don't have access to the debt or equity markets. Think of Miracle on 34th Street when the run on the bank happens and people ask for the money but he can't give them cash because he already loaned it out. This was all pre-Freddie & Fannie and therefore there was no secondary mortgage market for banks to recoup their cash after they made a loan.

Fannie, Freddie, or a private investor likely owns your loan. The CU owns the right to service the loan.

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Archie Sinclair
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Re: Credit union question

Post by Archie Sinclair » Thu May 07, 2015 6:21 pm

Credit unions come in two types: "Federal Credit Unions" and state-chartered credit unions.

All federal credit unions and most state-chartered credit unions are insured and supervised by the National Credit Union Administration ("NCUA").

However, some state-chartered credit unions are not insured or supervised by the NCUA. Personally, I would be afraid to do business with these credit unions, both because they aren't federally insured and because they're not subject to as much scrutiny. Fortunately, there aren't very many of them.

I don't know which type of credit union you're dealing with. You can tell by whether they have a blue box with the letters "NCUA" on their website or at their teller windows.

The Federal Home Loan Banks are 12 organizations established by the federal government in the 1930s to lend money to banks and credit unions, who in turn lend money to consumers for mortgages. The fact that the credit union does business with an FHLB probably tells you little one way or another about whether you're getting a good deal.

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The529guy
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Re: Credit union question

Post by The529guy » Thu May 07, 2015 6:47 pm

Archie Sinclair wrote:Credit unions come in two types: "Federal Credit Unions" and state-chartered credit unions.

All federal credit unions and most state-chartered credit unions are insured and supervised by the National Credit Union Administration ("NCUA").
And, if it's insured/supervised by NCUA, you can research the credit union at: http://researchcu.ncua.gov/Views/FindCreditUnions.aspx

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dm200
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Re: Credit union question

Post by dm200 » Thu May 07, 2015 9:53 pm

As other posts suggest, I would make sure this credit union is federally insured by NCUA. Privately insured credit unions are almost all fine institutions, but private insurance does not, in my opinion, have the size to handle many of their credit unions failing.

As long as this credit union offers the services and products you need and want - they might be better than a big credit union. Check out their fees/charges/policies to make sure they are all fair and reasonable.

Why not give them a try - and see for yourself.

By the way, I place zero credibility in the ratings of bankrate.com for credit unions. I know some really solid credit unions that have mediocre ratings and some dogs that rate high.

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Re: Credit union question

Post by friar1610 » Fri May 08, 2015 4:09 pm

NOVACPA wrote:
They most definitely are selling the mortgages. They just may not be selling the servicing rights.

Credit unions are accessing cash from depositors and therefore, they can't have their cash tied up in a loan since deposits are demand accounts and CUs don't have access to the debt or equity markets. Think of Miracle on 34th Street when the run on the bank happens and people ask for the money but he can't give them cash because he already loaned it out. This was all pre-Freddie & Fannie and therefore there was no secondary mortgage market for banks to recoup their cash after they made a loan.

Fannie, Freddie, or a private investor likely owns your loan. The CU owns the right to service the loan.
I did a little more digging and you are absolutely correct. Thanks for setting me straight.

Here is a quote from Navy Federal CU's 2014 annual report:

Navy Federal retains servicing on all mortgage loans it sells to investors. Navy Federal’s responsibilities as servicer include remitting monthly principal and interest payments, maintaining escrow deposits, performing loss mitigation and foreclosure activities and funding servicing advances that have not yet been collected from the borrower. Navy Federal had $173.3 million and $159.5 million of escrow amounts legally segregated in liabilities as of December 31, 2014 and 2013, respectively. Navy Federal recognizes servicing advances that are reimbursable as Accounts receivable on its Consolidated Statements of Financial Condition. Servicing advances as of December 31, 2014 and 2013 were as follows: (followed by a chart)....
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dm200
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Re: Credit union question

Post by dm200 » Fri May 08, 2015 5:13 pm

Think of Miracle on 34th Street when the run on the bank happens and people ask for the money but he can't give them cash because he already loaned it out.
Wasn't that "It's a Wonderful Life"?

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Re: Credit union question

Post by rec7 » Fri May 08, 2015 6:46 pm

dm200 wrote:
Think of Miracle on 34th Street when the run on the bank happens and people ask for the money but he can't give them cash because he already loaned it out.
Wasn't that "It's a Wonderful Life"?
I can picture Jimmy Stewart running a credit union today.
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