THANKS TO far-reaching federal regulatory changes voted last week, the best source for home mortgage money in the new year may be a membership organization you don't even belong to yet: a credit union in your area.
The National Credit Union Administration (NCUA) board approved guidelines that will allow thousands of credit unions to reach out to small groups of potential new members for the first time since 1996. The board also broadened eligibility requirements for millions of people currently excluded from membership -- unrelated members of existing credit union members' households.
The new regulatory moves, effective Jan. 1, are designed to substantially expand the reach and size of the nation's 11,000-plus credit unions. That, in turn, has special significance for anyone needing a home mortgage, because nonprofit credit unions increasingly are able to provide home loans below prevailing market rates and fees in the regular marketplace.
And, because they are membership organizations, they are often more willing to work -- and sympathize with -- creditworthy loan applicants who don't quite fit the conventional market's underwriting molds.
Here's what the changes for 1999 could mean:
For the past two years, credit unions have been prohibited by court rulings from reaching out to prospective members beyond their existing membership bases. That ban grew out of a federal court decision in October 1996 involving the AT&T; Family Federal Credit Union. But this year, Congress reversed the ban by passing the Credit Union Membership Access Act, despite intense lobbying by the banking industry.
Last week's vote at the NCUA effectively instructed credit unions on how to implement the new law. Under the guidelines, credit unions will be able to entertain applications from groups of people or organizations who wish to join.
Say you're employed by a small business in an area served by a credit union. You and your colleagues have heard that credit unions offer low rates on auto loans, personal loans and home mortgages, and you'd like to get access to these benefits. For the first time in two years, the credit union will be able to consider your application.
The rule changes for millions of existing credit union members are equally significant.
Eligibility for membership will now be extended beyond your immediate family to unrelated members of your household. This includes "any person who is a permanent member or participates in the maintenance of the household."
Typical examples include unmarried couples living together, same-sex couples, live-in housekeepers or nursing care professionals and virtually anyone else who lives in -- and contributes economic or other support to -- the household.
The payoff for mortgage hunters? Potentially plenty. Credit unions across the country have been aggressively expanding their offerings of first mortgages and home equity lines. During the first nine months of 1998 alone, credit union mortgage loan outstanding balances jumped by 14.2 percent, and now exceed $51 billion.
Generally -- but not always -- credit unions carry highly competitive interest rates and rock-bottom loan fees. Robert Loftus, NCUA's congressional affairs director, says costs typically run from one-quarter to one-half of a percentage point below what's available in the conventional market.
A random sampling of loan quotes from credit unions Dec. 18 produced offerings like these: Big, national credit unions, like the Navy Federal Credit Union, had 30-year mortgage money up to $240,000 at 6.5 percent with 0.75 "points." (A point is 1 percent of the loan amount.) The Navy credit union also offered one-year adjustable-rate loans at 5 percent.
Bellco First Credit Union of Englewood, Colo., offered all zero-point deals to its members: 30-year money at 6.875 percent, 15-year at 6.5 percent.
Smaller credit unions tended to be slightly higher on rates, but very competitive on points and fees: The Scott Credit Union in Collinsville, Ill., primarily serving the communities near Scott Air Force Base, offered 30-year fixed-rate loans at 7 percent and 15-year loans at 6.875 percent, with no points. Most of the credit unions surveyed also had home equity loans and lines of credit at or below prevailing market rates.
The upshot here: If you belong to a credit union and have used it for auto loans and personal loans, check out its mortgage packages. You could be surprised. And let unrelated household members know about the new membership eligibility rules, too. Once they're members, by the way, all their immediate family members may be eligible to join the credit union as well.
If you don't belong to a credit union and you'd like access to the newest big source of low-cost mortgage money, contact one or more in your area and see if you -- and perhaps a group from your office, church or club -- might be eligible to join in 1999.
Kenneth R. Harney is a syndicated columnist. Send letters care of the Washington Post Writers Group, 1150 15th St. N.W., Washington, D.C. 20071.
Pub Date: 12/27/98