Few Defaults Seen on Mortgages Issued by Member-Owned Credit Unions

Members Are Making Payments and Building Equity in an Otherwise Troubled Mortgage Market


PEWAUKEE, Wis., Sept. 5 /PRNewswire-USNewswire/ — People who have used a credit union for a home loan have been making regular payments — indicating credit unions offer a safe haven during otherwise troubled times for mortgage borrowers.


Wisconsin credit unions’ sixty-day delinquency rate for first mortgages is below one percent on $5.8 billion in loans outstanding. And when it comes to charge offs – or unrecoverable dollars due to foreclosures – Wisconsin credit unions’ rate is about two tenths of one percent.


“Unfortunately, all the news about people losing homes because they got into shaky subprime loans has made people fearful about borrowing,” said Brett Thompson, President & CEO of The Wisconsin Credit Union League, which represents 260 of the not-for-profit, member-owned institutions.


He says the state credit union regulator confirms that credit unions, unlike other lenders, have stuck to traditional forms of lending, even while making loans to low- or moderate-income people who might be likely targets for subprime lenders. For example, Federal Home Mortgage Disclosure Act figures from 2005 – the most recent available – show that low-income borrowers were almost twice as likely and minorities were two-thirds more likely in 2005 to have a home loan approved by a credit union.


“Because credit unions are locally owned by their members they have a strong disincentive to make gimmicky loans and a built-in incentive to make only loans their members can manage,” Thompson added. “If one loan goes bad that affects other owners of the cooperative.”


Thompson says credit unions reinvest their earnings in members in the form of lower rates on loans, higher rates on savings. “A credit union strives for soundness in lending to be able to offer attractive terms,” he says.


“Bottom line, credit unions’ mortgage lending is thriving and members are staying in their homes,” Thompson adds. “Credit unions’ purpose is to serve members, not make profits. So they remain an attractive option for borrowers making one of the most important financial decisions of their lives.”


Credit unions are cooperative financial institutions that are owned by their members and do not have stockholders. Because they are not-for-profit, they return earnings to members in the form of more competitive rates of return on accounts, lower interest on loans, lower fees and improved services. Around 2.1 million Wisconsin residents belong to credit unions, of which nearly half are open to the local community. People can find a credit union to join by looking in the phone book or by visiting http://www.creditunion.coop/.


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Source: Wisconsin Credit Union League