SEATTLE-Two credit unions based in the Puget Sound region are continuing to see excellent results from short-term, limited-fee mortgages they introduced this summer.
Both $9.6-billion BECU, Tukwila, Wash., and $146-million O Bee Credit Union, Tumwater, Wash., said the loans were designed to capture business from other lenders, and targeted consumers who have low balances on their current mortgages but might be dissuaded from refinancing due to the many fees incurred in a refi.
BECU offered a 12-year, no-fee mortgage, while O Bee rolled out a 10-year fixed mortgage for as low as 3.99% APR, also with no fees.
BECU's Todd Pietzsch, manager of public relations for the former Boeing Employees CU, said response to the 12-year mortgage has been "over the top."
"It far exceeded our expectations," Pietzsch told Credit Union Journal. "We had a marketing plan in place that we had to turn off because the demand generated just by an e-news article to our members that the loan was available was too strong."
Since July, BECU has funded 1,300 12-year mortgages for a total of $165 million, for an average loan amount of $127,000.
The average age for those approved for the 12-year mortgage is 54, which Pietzsch said "fit perfectly" with BECU's expectation that the product would be for people looking to retire in about 12 years.
"The demand we received showed there was a real need for this type of loan. These are people who have owned their homes for a long time who have some equity and have the chance to lower their rates with no fees."
BECU said anecdotally it is seeing borrowers coming over from other institutions, but it was unable to give precise numbers on internal versus external demand.
The BECU 12-year loan is available for a minimum of $35,000 and a maximum of $200,000, with a maximum loan-to-value ratio of 80%, including cash-out. There are no prepayment penalties. It is available to BECU members in Washington, Oregon, California, Arizona, Illinois, Pennsylvania, Kansas and Missouri.
O Bee: 'Still Going'
Lee Wojnar, VP of marketing for O Bee CU, had one word for the success of the 10-year mortgage: "Phenomenal."
"We are over $8-million now on 83 loans and the program is still going," he said. "It really hit a sweet spot with people who had 10 years or less on their mortgage and didn't want to pay all the fees."
Better news: the creditworthiness of the borrowers O Bee is seeing has been "extremely high," Wojnar reported. "They are just the type of borrowers we wanted. It moved over banking customers from BofA and Wells and turned into a very strong portfolio piece for us. For a credit union our size, adding $8 million in one type of loan is great growth."
How much longer O Bee runs the 10-year mortgage depends on its own success. Wojnar said the credit union holds monthly ALCO meetings to examine the credit union's entire portfolio.
"So we might take it down for three months early next year, then bring it back. But no matter what, it has been a tremendous success for us."