The "Fix" Is In For 30 Years At SECU: A Highly Risky Move

   But only for 30 years!

✅ Why booking a lot of 30-year fixed rate mortgage loans is a management mistake of the first order for all financial institutions... a mistake that the SECU ELT has already made.

😎 Question: If you had $100,000 in savings and SECU offered you a guaranteed fixed rate CD for 30 years at 3.25%, would you make that investment? Of course you wouldn't with the current economic uncertainty (and with the current 1 year rate at 4%!). No, just wouldn't be smart, would it?

Well, you have decided as a member to make that investment! ... or at least the lending gurus at SECU have made that mistake on your behalf! Remember this [link]: 

✅ "Who "funds" our loans at the Credit Union? In 2021 and 2022 SECU made over $6 billion in 30-year fixed rate mortgages at around 3.25% and "funded" those loans with other SECU members' hard earned savings dollars!"[That means you!]

😎 Question:Why would anyone do that with your savings? 

1)  Because "they" have figured out how to pay SECU savers 4% on CDs, invest your funds at 3.25% and not lose money.

2) Because the overall average low rate being paid for all SECU deposits and savings is only @2.50%. So, earning 3.25% while paying 2.50% is a really great deal as long as you don't include our operating costs of 2.30%.

3) Although 30-year fixed rate mortgages are now over 6%, members will become very eager to refinance their existing 3.25% mortgages. 

4) Rates will move lower and stay lower for the next 30 years. The Fed is targeting rates @2% so plus our operating expenses of 2.30%... well, don't exaggerate the loss.

5) Maybe SECU members won't notice for 30 years ... even with AI.

  Our Strategic Plan... "Hope for the Best!"

 

 

SECU Mortgage Lending: Making A Difference Or Making A Mess?

  GSEs: People Helping People?

You might think that I have some vendetta against GSE's (Fan/Fred) and the 30-year fixed rate mortgage. Not really. As they say, "it is what it is"... and that's not likely to change

In years passed, SECU became certified, originated, and sold mortgages to a GSE; the CEO at the time was even appointed to serve on the GSE's national credit union advisory council. SECU members believed that a 30-year fixed rate mortgage was a better choice - find a way to make that happen! A couple of problems quickly appeared:

1) We've already talked about the problem (2008) [link] of unlimited federal guarantees used to politically prop up these for-profit institutions' 1930's era self-interest.

2) "The American Reality" was the 20% down payment and pristine underwriting requirements precluded most SECU members from qualifying - the GSEs basically just skimmed off the "no-risk" mortgages from N.C. banks and credit unions.

3) "The American Reality" was the financial goals of the for-profit GSE (make more money!) quickly came into conflict with the financial goals of the not-for-profit Credit Union (leave more money in members' pockets!). Fees, PMI, and other surcharges abounded! 

3) "The American Reality" was when SECU sold a mortgage (6.25% for example) to the GSE, it was paid .25% "to service the loan" (collect payments, etc}. The real economic value in the mortgage (the remaining 6% in interest) was exported out of North Carolina, rather than retained to circulate in North Carolina communities (same type problem as exporting manufacturing jobs to China!)

4) "The American Reality" was SECU could not financially survive permitting the GSE to extract 95% of the value of the mortgage from the Credit Union - let alone the financial harm caused to local jobs, businesses, and the North Carolina economy.

5) The GSE "game" hasn't changed, still a taxpayer-supported problem waiting to happen again, a money loser for SECU, and an economic loss for North Carolina.

😎 😎 😎 Then was it possible to try and create a different mortgage that was a better deal for SECU members? 

 Yes, and the majority (about 72% so far this year!) of SECU members agree... [link]!