LONG ISLAND CITY, N.Y. — United Nations FCU here has unveiled a mortgage lending program aimed specifically at boosting the credit union's penetration with a historically very reliable class of borrowers — doctors.
UNFCU has worked to expand its mortgage program, it has opened Loan Production Offices in Washington, D.C. and New York City. This program was suggested as a result of opening up the new office in Washington, said Eric Darmanin, chief lending officer at the $4 billion credit union.
"We were introduced to the fact that other [non-CU] lenders were offering competitive doctor programs," he said. "We did some research and found that there is somewhat less risk with these types of loans because of the fact that medical doctors have a highly marketable profession, and also because of the fact that there's some employment stability."
The program only uses adjustable rates, and while applicants must have a down payment of 10% or more, the loans do not require private mortgage insurance. Five-, seven- and 10-year ARMs are available, with the CU adding one quarter of a percentage point to the initial rate, "which is considerably less than you'd pay with private mortgage insurance, " said Darmanin. Rates start as low as 2.5% for the first five years.
Whereas most mortgage applications require some sort of employment history, UNFCU's program will allow recent med school grads to show proof of their medical license and contract of employment at a hospital or medical office.
"We're not feeling it's necessary to look back at two years of employment as you typically would," said Darmanin. A minimum credit score of 720 is also required for all applicants.
The credit union expects this program to generate $20 to $50 million in loans by the end of 2015, Darmanin said. "It's a nice product, but we don't expect this to be the majority of our production," he said. "We expect it to bring some incremental lift."
UNFCU's Loan Production Offices will do most of the heavy lifting when it comes to getting the word out about the program, relying on relationships with hospitals and medical practices to promote the product. A small amount of social media and other promotions are planned.
While financial institutions understandably want to tap medical professionals as a potentially lucrative lending segment, doctors fall outside of what has historically been the consumer group served by CUs. So why is UNFCU going after doctors when there are so many lower-tier credit classes they might reach out to instead?
"We have the responsibility of serving our members but also protecting the credit risk for the credit union," said Darmanin. "So rather than taking a broad approach and doing a large-scale rollout of a no-mortgage-insurance product, we chose to start with this particular niche where we know the risk is controlled, and then we can always look at other segments as we go down the line."
Darmanin said that this program "is really designed to dovetail with our efforts at reaching outside of our traditional field of membership through our alliance with United Nations Association of the United States of America (UNA-USA), as well as all the different U.N. agencies that are part of both New York, Washington, D.C. and throughout the United States. We feel this is a good first step by having this program in addition to our other programs that serve the international community here within the U.S."
Doctors who support the U.N. through UNA-USA can join the credit union through UNFCU's partnership with that organization.
