Bartlett, whose broker’s license also authorizes her to negotiate loans, touts credit unions as a good alternative to major banks for jumbo loans.
"Even when (jumbo) rates were astronomical, I could get rates that were close to jumbo conforming all along," Bartlett said.
Although borrowing from a credit union means becoming a member, the rules for joining have been relaxed to the point where merely living or working in a credit union’s service area is enough to establish eligibility.
"There is a big difference dealing with a bank that has to report to stockholders and a credit union that is a not-for-profit," Bartlett said. "They remind me of how banking used to be about 20 years ago. I can go in with a common-sense loan and get a deal done."
Bartlett said she has also done consulting work for KeyPoint, which does most of its mortgage lending in four counties ringing San Francisco Bay: Santa Clara, San Mateo, Alameda and Contra Costa.
"Anything east of that looks pretty tough right now," Erwin said. Fast-growing suburbs and bedroom communities that sprang up far from job centers during the housing boom have been some of the areas hardest hit by falling home prices and foreclosures.
"That’s what’s hurting people," Erwin said of the difficulty obtaining a jumbo loan in a declining market. "When you have foreclosures in your neighborhood, the appraiser uses that instead of a normal comp."
Steven Stapp, president and chief executive officer of San Francisco Federal Credit Union, says the lender’s jumbo loan volume is 25 to 30 percent higher than in years past. He suspects that trend will hold for the next couple of years.
Traditionally, he said, many borrowers have considered credit unions primarily as a place to refinance their mortgages. Now, he said, "we’re starting to see more purchase loans coming our way."
Although it could sell conforming and "super conforming" loans eligible for purchase and guarantee by Fannie and Freddie into the secondary market, San Francisco Federal Credit Union is also keeping the majority of loans under $417,000 that it originates in its portfolio, he said.
The credit union is looking for good FICO scores and down payments of 20 percent on conforming loans and 30 percent on jumbo loans.
"We know that’s a pretty high standard, but we haven’t really changed the criteria for the last 10 years," Stapp said. "Our mortgage portfolio is performing very well for us."
Erwin said KeyPoint will make jumbo loans of up to $1 million with as little as 20 percent down, and loans of up to $1.5 million with 25 percent down. But, he said, the average down payment is more like 30 to 35 percent, and KeyPoint wants to see FICO scores of 700, instead of the 680 that was the norm in better days.
Those high standards are one reason credit unions can still make jumbo loans today.
"We are really trying to look for loans and borrowers we can put on our books and our balance sheet," Stapp said. "We are putting those on our portfolio, and taking on 100 percent of the risk of the loan."
On an institution-by-institution basis, credit unions and community banks may look like small players in the jumbo loan market. Stapp said San Francisco Federal Credit Union makes about four or five jumbo mortgage loans a month, and won’t make loans larger than $1.3 million. Erwin expects KeyPoint to make $50 million in mortgage loans this year, most of them jumbos.
But cumulatively, the impact of the thousands of credit unions and community banks around the nation is much larger.
According to the National Credit Union Administration, the nation’s roughly 5,000 federally chartered credit unions hold $442.4 billion in assets, and another 3,000 state-chartered credit unions hold $360 billion in assets. NCUA estimates that loan volume at federally chartered credit unions grew 7.7 percent from 2007 to 2008, to $528.6 billion, with a 14.5 percent increase in first mortgage and real estate loans and lines of credit.
Realtor and builder industry associations say new rules governing appraisals conducted for loans destined to be bought and sold by Fannie Mae and Freddie Mac have been derailing many home sales since they went into effect on May 1.
The new rules, designed to prevent lenders from pressuring appraisers to inflate home values, mean that appraisals in declining markets are often unrealistically low, industry trade groups say (see story).
But the Home Valuation Code of Conduct, as the new rules are known, doesn’t apply to jumbo, FHA or VA loans. So credit unions haven’t been forced to change their appraisal process when making loans they expect to keep on their books as investments. …CONTINUED