Mortgages Up 25% After Streamlining, Fee Changes

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State Employees' Credit Union (SECU) increased its mortgage loan applications by 25% after streamlining its program, reducing rates and eliminating some fees outright.

Senior Vice President of Loan Administration Phil Greer said the policy changes came after a normal review of practices. SECU staff reviewed its lending program and decided to enact several measures to enhance member value and create more loans. Starting in February, SECU reduced the origination fees on two-year ARMs to 0.5% with a cap of $750, and eliminated origination fees for its First Time Homebuyer mortgage and the special State and Teachers Adjustable Rate (STAR) program.

"We felt it was an appropriate stance to take," Greer said. "It's a little more member friendly."

SECU's First Time Homebuyer program was launched in 1989 and has created more than 6,000 member loans. STAR is a program that encourages new or transplanted teachers to come to North Carolina or help them move to another school system within the Tar Heel State. Greer noted the state's booming tech industry has created a very high need for teachers of all types.

After reviewing flood determination fees, Greer said SECU decided to absorb the costs, which are relatively minor to the country's second-largest credit union, but which could be a point of difficulty for a young family or first-time borrower.

SECU also increased the loan amount on a 100% LTV, two-year ARM for a primary residence to $375,000.

"It has a big impact on individual members who struggle with closing costs or fees," Greer said.

Greer said all of the SECU actions are within the credit union's existing, and very successful, two-year ARM program.

In addition, in May SECU eliminated the 95% LTV program and made all members eligible to apply for 150% LTV loans to help simplify the process, Greer said. SECU also created new margins of 2.5% for LTVs of 90% or less and 3.0% for LTVs higher than 90% for all two-year ARMs offered by the CU.

"Everybody got a reduction compared to where they had been in the past," Greer said.

As for concerns over whether members might take on too much debt with reduced rates or waived fees, Greer said SECU attempts "very earnestly to appropriately qualify" all mortgage applications and that a bad loan package "won't do anybody any good." If a member has good collateral, but a poor chance of making future payments, the loan won't work, he said.

"We don't make a loan that doesn't appear to be financially prudent for the member," Greer said.

Greer said member feedback has been positive but it was too early to see any definite percentage of increase.

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