BOWLING GREEN, Ken.-Lending has been on a tear at Service One CU here.
Kristie Kennedy, VP of Lending at the $108-million 14,000-member credit union, said a series of "specials" on various loan products has been driving volume, with the biggest response to its FAST Mortgage-short for Fast Amortizing Short Term loan.
"It's targeted toward members with less maturing mortgages who want to pay off the balance of their home mortgage in a shorter term and receive a low, fixed rate with minimized closing costs," said Kennedy.
SOCU has been offering FAST mortgages since 2004, but cut the rate to 2.99% earlier this year. Since the promotion began in May, SOCU has booked 25 FAST mortgages totaling $1.575 million, with an average weighted rate of 3.23%. Both five- and 10-year terms are available, with rates at 2.99% and 5.5%, respectively. The credit union stipulates that loan-to-value not exceed 70%, the member's credit score must be at least 680 and a full appraisal is required.
Service One uses risk-based and relationship pricing.
Kennedy noted that an ad campaign-both TV and print-has led to some members refinancing from other lenders into the FAST product. The consumers who are taking advantage of the product, said Kennedy, tend to be "seasoned members who have a smaller balance and have a higher interest rate and realize 'I can pay this mortgage off in five years and be done with it.'"
Some have done cash-out refinances, but most have just been short-term mortgages, she added. The average loan is about $63,000.
But FAST is no standalone success story, and Kennedy said that Service One is seeing demand for several other loan products. Since May, SOCU has also booked more than 30 first mortgages, ranging from five- to 30-year terms. Whether fixed rates or ARMs, SOCU has closed $3.6 million in first mortgage loans, with a weighted rate of 4.653%.
Factors In Success
Kennedy said a number of factors have gone into that success, including the fact that closing costs are set at $999 and the CU does not charge points. The biggest factor, she said, has been Service One's willngness to be flexible on LTV. "We have no PMI, and that's the sad thing about a lot of FIs-their regs are so steep with the 80% loan-to-value, and we will go higher than that with no PMI. People don't have a 20% downpayment right now, and your secondary market guidelines almost demand that you have 20% down."
Kennedy said that SOCU does not sell mortgages to a secondary market.
"We haven't had the foreclosures like Michigan and California and Georgia," said Kennedy. "Our property value has not depreciated as much as it has in other areas; it is still appreciating. As far as job losses, this area has been somewhat of an economic utopia, because we've just been very fortunate with individuals retaining those jobs."
Those individuals need cars to get to those jobs, and SOCU's Summer Sizzlin' auto promotion was also a success, with 121 loans totaling $1.5 million closed between mid-July and the end of August. Rates started at 2.75%, and the weighted rate was 7.08%.
Kennedy credited Service One's lending staff for the recent successes.
"They are very good at reading credit reports, cross-servicing and looking for additional opportunities, and I think that's the key to putting out more loans," she said, adding that "There's luck in this, but I also believe that there's some really compassionate people who love to serve our members."
