Previously, I described how it is every American's patriotic duty to vigorously protect themselves from getting taken for a ride in the area of financial services. The few examples, briefly covered, did not begin to do justice to the topic.
On the one hand, you can sharpen up your diligence any time you deal with a commercial financial institution. Out-shark the shark. It takes attention and care, but it can be done. On the other hand, you can opt out, turning instead to community financial resources that likely will treat you much better, give you a better deal, and give you the satisfaction of contributing to your community instead of helping cover a payment on the CEO's private jet.
It's funny, when corporations self-organize for their own interest, it's portrayed as a good thing, you know, the market. But when people self-organize for their own interest it's - socialism! or worse! Herewith, one example.
Review from last time: Commercial financial institutions are getting fat off us, not just because of the many dubious things they do, but because we let them. This has wrecked the economy of the entire country because it is now easier to profit from deceit than by delivering something valuable. By our daily decisions, we need to force companies to deliver value. Only in this way will we as a country grow stronger again.
I try hard to convey that this is not about numbers of dollars, it is about our families and the soul of our country. Your dollars count, and they need to help you and your family first, and also go only to deserving suppliers who actually do help you.
Today, it's about mortgages. Poor timing for many of us, I know, but there still are many refis going on, and if not now, then I hope this info will be useful to you in the future.
If you are shopping for a mortgage, there's a good chance that you will go to a comparison site like zillow.com or bankrate.com (I'm not linking on purpose!) where you can see various mortgage rates from this or that lender, pretty maids all in a row, and choose the lowest priced. Pretty smart, eh?
Well, no.
It's a suck in. All those choices help you feel like you will find the best deal, there is something hugely, gapingly, missing. The best choice, in fact the only reasonable choice. It's not there!
That something is credit unions. Credit unions are non-profit lenders (and deposit institutions too BTW) that are present in your community. They will loan you money if you qualify. They are much more likely to be honest with you than a commercial lender. They will have very competitive rates.
And here is the most important part: To my knowledge, they will not sell your mortgage to someone else.
That means that a credit union is something old fashioned, something you thought had vanished from the landscape. Your credit union will actually be your partner. They need you to succeed in order to get their loaned money back, so they can loan it to someone else.
It turns out that a mortgage is more than just a good rate. It is also an agreement with a promise, going in two directions: You agree to keep making the payments, and the lender agrees that if you keep making the payments, then you will be able to pay off your loan and keep your home in peace.
Like so many things by the year 2010, the promise on the lender's side has somehow been allowed to evaporate. Sellers are allowed to consider your loan to be an asset, and they can sell it to someone, anyone at all. They are not required to evaluate any aspect of the purchaser. They could sell your loan to the mob, and they will if they can get a good price. This has terrible consequences:
- They don't care if you succeed. A commercial lender will loan you a mortgage and turn around and sell it as quick as they can, so it just doesn't matter to them whether you can make the payments.
- The purchaser, or a loan servicing company, might even make money by foreclosing on you even if you are current on your payments, or have had minor late payments.
- The blurry trail of loan sales and securitization (where your loan gets chopped up into 1000 pieces) makes mistakes much more likely. That's right, you could get tossed out on to the street - by mistake! (Thanks to Julian Domain for the link, in comments on a prior dairy).
A credit union has the opposite approach. For illustration, I want to point to Boeing Employees Credit Union, where I refinanced two years ago. I do this not to plug this particular credit union (although they're great) but to show what's possible. Check out their site, not just for loan rates, but for everything they are about - an organization that actually serves the community, by competing successfully with the supersized banks.
(So why don't credit unions show up in loan comparison sites? I don't know for certain, but I have a suspicion. Hint: One thing the commercial lenders all have, and I'm not sure that BECU has, is an advertising budget. Pay per click? I think so!).
I spent a couple of months shopping for rates. I had no idea that BECU existed until a friend mentioned them. Then he also told me that any resident of WA state could become a member, so that was a non-obstacle. Once I started tracking them, I was surprised to see that their rates were always just a tad lower than the best I could find otherwise. I wonder why? No need to pay for profits, supersized CEO salaries, or advertising, that might be a clue.
[So I rechecked this evening, and I did find a commercial lender with a lower rate than BECU's current rate - by 0.125%. Based on recent events, I'd pay 0.125% in order to have a loan that does not get sold or securitized, and my other finding with commercial lenders is that somewhere, somehow, there will turn out to be another fee that's not in the initial quote].
The application and closing process at BECU was very professional, no problem getting all that done. Expensive of course, no dodging the various people like appraisers and title co who need their pound of flesh, but not the credit union's fault there.
That was two years ago. I have a loan which was the best available rate at that time, and which to my knowledge will never be sold to some loan shark somewhere else. Best of all, the interest I pay is going directly to finance other loans to people in my community.
Back to the real purpose: It's not just about the numbers. Commercial lenders are the Mr. Potters of the world, getting fat off your work. Take it personally! Don't feed Mr. Potter any more! When you pay interest on a loan, the only good place for that interest to go is into a community institution that will lend it to your neighbors.
[Thanks to JustJennifer for mentioning credit unions in comments on the prior diary, inspiration for this one]
Peace,