Credit Unions Up Their Mortgage Game

An article last week in the New York Times shows how far American Credit Unions have come in recent years when it comes to getting into the home mortgage game.

The Times – citing data from the Credit Union National Association – points out that credit unions grew their share of the mortgage market from 1.9% to 8.3% of all U.S. originations from 2005 to 2014.

Credit unions have had great success offering the 5/5 ARM, an adjustable rate mortgage product whose interest rates adjusts periodically.

However, unlike other ARMs – which can adjust annually after a set time (3-or 5 years, usually), the 5/5 ARM, only adjusts once every five years. Also, it cannot adjust more than two percentage points at a time, with a maximum increase of five percentage points throughout the life of the loan.

This makes the 5/5 a safer bet for member/borrowers – who do not face massive rate increases – as well as for the credit unions themselves, who still get to adjust rates upward to keep pace with general rate inflation in the markets.

Since credit union members are also part owners of their credit unions themselves, this aspect of all-around financial safety is a good fit for the credit union movement.