Reverse Mortgage Guide

Larry Morris writes and says regarding the new reverse mortgage offering from SECU in North Carolina, “I like some of the bells and whistles, but find it interesting that in their brochure, they are comparing a fixed SECU Reverse Mortgage at 6.75% with an adjustable HECM Reverse Mortgage at 6.75%. So they are just looking at fees, not the reality of where the CMT currently is and historically has been. It will be interesting to see how much of their members money they can loan before they realize they are in the Real Estate business. Watch them invest their pension dollars in this as well…”

Credit unions, of course, are a source of financing outside the orb of commercial banks. They have different, and from a consumer perspective, often better economics. When the North Carolina State Employee’s Credit Union (SECU) says it will offer a reverse mortgage with “a fixed, stable rate of interest, a simple interest accrual method, a low origination fee of 1%, no mortgage insurance and no monthly service fees” you have to assume these folks did not set such fees blindly.

One of the reasons that commercial bankers have tried to close down credit unions is that credit unions exist to benefit members, not management.

In 2005 I gave a speech before ARELLO, the Association of Real Estate License Law Officials and said that “according to The Washington Post there are some 9,000 non-profit, member-owned credit unions nationwide. Banks want credit unions to convert and become for-profit mutual savings banks. Why? According to the Post, credit unions are ‘low cost’ competitors who have ‘exerted a downward pressure on the fees banks charge.’” (See: Banks Look to Make Converts of Credit Unions, Feb. 11, 2006)

“Now you might think that the National Credit Union Administration, the federal regulator, would have some say in the conversion process. Nope. The Post reports that under a 1998 law the ability of the NCUA to block conversions was simply eliminated.”

I would expect that if SECU’s low-cost reverse mortgage concept spreads that the obvious result would be an effort to eliminate the ability of credit unions to originate reverse mortgages by changing the law. In some eyes, that’s a lot easier than meaningful competition in the marketplace.

This entry was posted on Thursday, August 7th, 2008 at 5:40 am and is filed under Reverse Mortgage . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.