ORLANDO, Fla.– Credit unions in several of the most troubled mortgage markets in the country are tightening certain underwriting standards, changing policies, adding new analytics and even finding some new avenues to lend.
Dale Frankhouse, director of lending with Sun FCU, said the Toledo credit union has closed on nearly $20-million in first mortgages since introducing three new non-rollover balloon products on Jan. 1, including a 15/30 note; a 12/25 note, and a 12/30.
The 15/30 has proven to be most popular. Seeking to reduce risk on mortgages, Sun has reduced the maximum combined loan-to-value ratio from 100% to 95%, raised the minimum credit score to 640, and if the property has been owned less than one year, it uses the purchase price, not the appraisal, for financing.
In Vacaville, Calif., near the heart of state’s troubled home market, Travis FCU has placed special emphasis on analytics showing the types of mortgages underlying its other loans and has tightened a number of policies. "When you know what the current LTV is and you know what kind of loan you’re behind, then you can start to make some sense of what kind of risk there is in your second mortgage portfolio, as well as credit cards and autos," David Purcell, the credit union’s vice president, business services, told The Credit Union Journal, during CUNA Lending Council Conference.
Travis has also reduced CLTV to 80%, and now requires a letter from members explaining the intended use of cash-outs, among other things.
On Florida’s hard-hit Gulf Coast, Grow Financial CU said it actually forecasting a 3% increase on its mortgage portfolio this year, even as the average home price has sunk to levels last seen in 2005. Don Genevie, vice president real estate, said Grow Financial sees major opportunities in the 50% of its 185,000 members who do not have a home and who may now be able to afford one.
The $1.8-billion credit union, which began seeing the decline in home prices in 2007, made underwriting changes to home equity by lowering LTV 10% in all categories, and limiting LTV on higher-end properties 15%. Grow Financial has also made changes to its automated valuation models; required that a property have four comparisons within the past six months; and required 70% confidence score.
