How One CU's 'Rapid Refi' Program Is Cutting Members' Mortgage Costs in a Hurry

MADISON, Wis. — Members at UW Credit Union here can slash their mortgage costs quickly thanks to a new program that bypasses closing costs and appraisals.

The "Rapid Refinance" program was introduced as a response to a huge spike in home loan activity at the $1 billion institution brought on by record low mortgage rates. Many members looking to cut down their payments were retirees with solid equity in their homes and were close to paying off their loans.

"We found out that 300 loans in the last two and a half months fit into this category - people who owed less than $125,000 and were interested in 15-year fixed loans," said VP-lending Mike Long, noting UW Credit Union places a 65% LTV limitation on these loans. "Member demand has been so high in the last three months for mortgage processing; by the end of March, we'll have closed as many loans as we did in all of 2007."

Since members who quality for a rapid refi have strong equity positions, the program steps around the appraisal process and avoids closing costs as well. To increase turnaround speed, UW Credit Union is processing these loans as if they were home equity loans, freeing up first mortgage loan officers, processors and underwriters. The result is a 4.9% fixed loan over 12 years that saves the member a bundle and does so in a hurry. "Because of their equity position we're forgoing certain documentation requirements and making it easier for them to get to the closing table. Rather than have them pay $1,200 to $1,300 in closing costs, we're charging them a $79 fee," Long explained. "Since we're processing these in the area that normally processes home equity loans, the members we've talked to have been surprised when we ask them if they'd like to close tomorrow."

The savings are pretty substantial over the life of the loan. For example, a $100,000 "Rapid Refinance" loan on a home worth $250,000 would save the owner $6,300. Members can even see how much they will save through a calculator tool on the credit union's website.

While UW Credit Union stands to lose a bit on fees and interest through the program, the 131,000 member strong institution will likely see a nice bump in its portfolio brought on by very safe loans. The credit union sells about 95% of its mortgages on the secondary market, but plans to keep those processed in the "Rapid Refinance" program on its own books.

"These loans will stay on our balance sheet and help us grow our loan portfolio as well," said Long. "It's a great deal for everyone."

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