The Larger Problem With The 30-Year Fiixed Rate Mortgage

  Federal Reserve Graph of 10-Year Treasury Note

   

...which is generally used as a base to set home mortgage rates. 

 😎 Anonymous September 19, 2025 at 9:13 PM   "SECU employees do a great job at educating members about how an ARM is very often the better option. What would your argument be against offering a 30 year fixed if the member is educated on an ARM and still wants the 30 fixed?

First, I agree that SECU  branch employees have done a remarkable job in explaining the benefits (many still have doubts!) of an ARM to a very, very skeptical membership. The 30-year fixed rate is the "industry standard"after all; and, those with vested interests in keeping it that way, emphasize the rising rate risk with some not so subtle boogeyman tactics. 

Why? Because there is lots of money at stake (surprise, greed is involved!). Remember a 30-year fixed rate mortgage is a financial "heads I win, tails you lose" proposition for mortgage brokers, who now originate the vast majority of U.S. home mortgages. 

✅ Here's the key for your consideration: A mortgage broker makes the loan, but doesn't "fund it". What do you mean "doesn't fund it"? Well, when we borrower to buy a home, "somebody" has to provide the money for the loan, right? (Most of us don't think about that side of the transaction!) 

With brokers the investors are most often those GSEs (taxpayer guaranteed enterprises), currently under conservatorship by the Feds. The broker just wants to make the loan and isn't going to argue with you about which loan is best. A 30-year fixed rate is what you want, fix rate is what you get! The broker doesn't care because "somebody else" (the GSEs) is funding the loan; the broker isn't "on the hook".

😎 Lets take a look at the classic problem with an "SECU funded" 30-year fixed rate mortgage. See that low point in rates around 2021/2022, which was the result of the pandemic?  Rates hit an all-time rock bottom.  

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!

Over the last 3 years, SECU has only been able to keep member deposits by paying 4% to 5% rates on CDs (the rest of member deposits earn substantially less!). Over the last 3 years, total SECU member CDs have grown from $4 billion to $15 billion - from less than 10% to @30% of total member deposits.

😎 SECU earns  3.25% for the next 30 years and pays members 4%/5%? Really? That's fantastic!

How exactly does that work...?  

 

 

 

SECU Should Make - And Keep - All Types Of Member Mortgages!

  Yes, to all the above?

 ✅  Commenter: Anonymous September 20, 2025 at 1:05 PM

"So only ARM mortgages should be offered to SECU members? That is what you are stating?"

No, the concern is over the 30-year fixed rate mortgage [link], which most consumers think is better [link]; and the proposed future selling of our member mortgages into a huge, financially risky, taxpayer-guaranteed support system which failed in 2008 and has been in conservatorship for the last 17 years [link].

In a world where market interest rates can fluctuate widely (post 1980 federal deregulation), no reasonable lender or investor would normally make or purchase many 30-year fixed rate mortgages - a relatively low rate investment - unless Uncle Sam guarantees against losses when "things go bad" - and yes, they eventually will go bad [link].
 

SECU has been making fixed rate mortgages every year for over 75 years. In fact when deregulation hit in 1980, SECU was almost "loaned out" and had @ 50% of its assets (loans) in 30-year fixed rate mortgages at rates of 7% and 8%.  

By 1981 after deregulation hit, SECU was paying 16% on a six-month CD (and some members were complaining that 16% was too low!). Earning 7% to 8% on those 30-year fixed rate mortgages while paying 16% and up on CDs...  doesn't take a financial genius to figure out how that will turn out. The Savings and Loan industry (which made most home mortgages at the time) collapsed and disappeared. As a financial institution, you can't pay 16% and earn 8% for long!

✅ So let's look at SECU mortgage lending over the last few years:

Dec. 2022 New fixed >15yrs   $2.25 billion

                New fixed <15yrs   $300 million

               ✔ ARMs                   $4.2 billion          Total mortgages:   $22.2B

Dec. 2023 New fixed >15yrs   $560 million

                New fixed <15yrs   $195 million

                ✔ ARMs                 $3 billion            Total mortgages:   $24.3B

Dec. 2024 New fixed >15yrs   $875 million

                 New fixed <15yrs   $225 million

               ✔ ARMs                   $2.2 billion          Total mortgages:   $25.3B

June. 2025 New fixed >15yrs   $373 million

                 New fixed <15yrs   $129 million

            ✔ ARMs                      $1.6 billion          Total mortgages:   $$26. B*

* At June, 2025, SECU held 37,000 member fixed rate, >15 years mortgages totaling $7 billion, 25,000 fixed rate, <15 years mortgages totaling $2 billion, and 107,000 member ARMs totaling $17 billion 

✅  If ARMs are so bad for SECU members, then why does the ELT and SECU Board keep "sticking it to the membership"?  

😎 Must be that some of those Luddite, "new/new" commenters [link] are continuing to fumble around with their 1930/2008 ideology - it's been a costly misadventure for the SECU membership.

 You did look that word up didn't you?