ALEXANDRIA, Va. – Pentagon FCU said it has boosted its mortgage lending more than 50% for the first quarter as increasing numbers of members are refinancing their loans.
The $10 billion credit union has originated $461 million worth of mortgages for the first three months, the vast majority of them refinances, according to Rod Raszler, vice president of mortgage lending. That puts the credit union well on the way to topping last year’s $1.6 billion in mortgage loans.
Though the credit union started its own real estate company a year ago, most of the mortgage business is coming through the credit union, not PenFed Realty, said Raszler.
In January, loan volume was up 39% to $125.5 million; in February it was up almost 80% to $159.1 million; and for March it was up 44% to $177 million–a new one-month high for Pentagon.
Raszler attributed the surge to two main reasons. First, the credit union has eliminated almost all fees: appraisal, settlement, tax set-up, and pays a majority of the closing costs for the member.
And, rates are among the best in the greater Washington, D.C., market and the other markets the credit union competes in: California, Florida and North Carolina.
While many members are refinancing into low, fixed-rate loans: 6% for a 30-year and 5.5% for a 15-year mortgage, with no points, others are attracted by a low-cost, five-year ARM, said Raszler. The five-five ARM starts at a low rate, currently 5.12%, then resets after five years no more than 200 basis points higher, or downward, if rates go down, indexed to the five-year Treasury bill. If it were to reprice today it would be lowered to a 3.5% rate.
And if after five years the rate is bumped up higher than that for a new loan, the credit union make it at the new loan rate.
How can the Pentagon afford to do this? “We have a very low expense ratio; we don’t pay our loan officers any commissions and we have very few losses–we don’t make subprime loans,” Raszler told The Credit Union Journal yesterday. In addition, the vast majority of its loans are originated online.
