Rain City Guide

Banker, Broker, Consumer Lender or Credit Union? Part 4

Jillayne Schlicke on 07 26, 2007

Part 4: Credit Unions

Credit Unions are structured differently than banks, mortgage companies, or consumer finance companies. A credit union is structured as a non-profit, or as a for-profit, with a purpose of returning profits to its members in the form of dividends paid on savings, or reduced interest rates on loans. Credit unions are run like a co-op; owned and controlled by their members.

Government regulations require that credit unions limit their membership to specific segments of the population, such as people who live, work, or attend school in a well-defined geographic area, employees of specific companies, trades groups, non profits, or a particular occupation such as teachers.

Credit union policies regarding interest rates are set by a volunteer board of directors elected by the membership. Only a member of a credit union may depositmoney with the credit union, or borrow money from it. Credit unions have marketed themselves as providing exceptional member service and a commitment to help members improve their financial outlook. In that regard, credit unions will not make a loan if the loan is not in the best interest of the member. Not all credit unions have a good mortgage department. Some merely refer business to another company or broker everything out. Either way, watch for a limited number of loan programs, inexperienced staff, and find out who will service the loan.

[photopress:rtabe270a.jpg,thumb,alignleft]Perceived advantages

Sometimes fees can be lower Credit union members may already be familiar with credit union staff members

Interesting fact: Credit unions are exempt from the Federal Community Reinvestment Act, the law that forces banks to provide services in low-income areas because banks were caught “redlining” underserved areas in the 1970s. Credit unions are not subject to federal “community reinvestment” requirements because credit unions, due to their mission of “members helping members,” already meeting the financial needs of a broad range of people within a community.

Interesting way to utilize a credit union: If a consumer happen to find himself or herself at the low end of the credit score system, or is being told that he or she ONLY qualifies for subprime loan products, while still shopping for a lender, a consumer ought to also consider talking with a credit union. Since credit unions cannot make a loan that is not in the best interest of its members, if your credit union turns you down for the same kind of subprime loan, perhaps that could be one way of determining whether a subprime loan would not be in your best interest, since retail mortgage salespeople at other institutions do not have a duty to act in the consumer’s best interest, although some clearly do.

So how does a consumer go about selecting an individual retail mortgage salesperson at ANY of the institutions we covered in this series? Luckily, Rhonda Porter has already taken on this topic.

If you enjoyed part four of this four part series on different types of mortgage lending institutions, here are links back to the other three:
Part 1 Banks and Mortgage Banks
Part 2 Mortgage Brokers and Correspondent Lenders
Part 3 Consumer Loan Lenders

About the Author: Jillayne Schlicke

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Jillayne Schlicke researches, writes, and instructs continuing education courses, convention workshops and keynote presentations for the real estate and mortgage industries on a wide variety of topics as CEO of CE Forward, Inc. Jillayne is also the Founder and Executive Director for The National Association of Mortgage Fiduciaries, which serves the mortgage lending industry by raising ethical standards, creating a framework for industry self regulation, providing continuing education classes, and helping the industry prepare for the emergence of fiduciary duties. Jillayne received an M.A. in Psych from Antioch University in Seattle where she studied moral psychology, philosophy, and business ethics and received a B.S. in Business and Systems from the University of Phoenix. Jillayne presents hundreds of classes and workshops each year, has published numerous articles for various publications, is a contributing author and editor on Rain City Guide, has been appointed to 38 professional association chair positions or committees and has received 13 industry awards including "2008 Instructor of the Year" from the Seattle King County Association of Realtors. Contact Jillayne at 206-931-2241 Read Jillayne's stuff on Rain City Guide...