People in the Pittsford, N.Y., area—just outside the city of Rochester—tell their friends about the great lending programs offered by $378 million Pittsford Federal Credit Union.
According to Senior Manager Brian D. Scudder, that’s because the credit union is able to have real people on its staff make local decisions based on people’s specific situations.
For example, Rochester is home to an excellent regional medical facility in Strong Memorial Hospital. Many outstanding doctors move to the area from overseas to work at the hospital. At first, these doctors don’t have a U.S. credit history and that can make it difficult for some lenders to approve them for a mortgage.
“We can help out,” Scudder says, in part because the credit union doesn’t plan to sell on the secondary market every mortgage it makes. “A lot of consumers will go and apply (for a mortgage) through a broker or a national bank and that institution doesn’t intend to hold the loan on its balance sheet. They intend to sell the loan from the get-go.
“We limit selling to 20- and 30-year fixed rate mortgages. A home purchase (or refinance) that’s 10-year fixed, 15-year fixed, or adjustable rate, we keep in portfolio and on the balance sheet. Because of this, we aren’t subject to Freddie Mac rules. We can be more creative in solving members’ issues.”
Scudder says the credit union has also leveraged its ability to make unique (first or second mortgages and home equity loans) to help people who are buying a home that—say—doesn’t currently have a kitchen. Other lenders won’t approve a loan because the property in question can’t be appraised without a kitchen. But putting in a kitchen is exactly what the member needs additional money for!
“We also continue to offer ‘non-qualified mortgages’ to borrowers with a debt-to-income ratio over 43 percent,” he says. The credit union works with borrowers who have little reportable income, but in fact have substantial assets and the ability to draw on them.
“We want that loan,” he explains. “It looks weird when viewed from the traditional perspective, but the circumstances are often ideal. The member is well-situated with investment assets, and living without drawing on those assets extensively. Are they a good risk? Absolutely. They simply don’t fit in the standard W-2/monthly income/traditional debt ratio ‘box’.”
The credit union is realizing it has a niche in “unique lending” that only a few other competitors in the market come close to serving. Scudder says this is something that can be an asset in marketing the credit union.
Even some of the CU’S regular loan products are standouts in the community. For example, the CU offers a bridge loan that helps members keep a deal alive when the closing on their current home doesn’t line up well with the closing on the new home they wish to purchase.
This is for members “who need to extract equity from the home they own to put into the home they’re buying,” Scudder explains. “It’s done in a way to minimize everyone’s costs. We don’t record the mortgage (on the bridge loan) to save recording costs for the member. Since the borrower is also borrowing for the purchase of their next home through PFCU, the risk is minimal, and there’s never been a significant issue related to our unique approach.”
A member who “has equity in an existing home and is buying another home typically isn’t living on the edge financially,” Scudder elaborates.“They’ve got enough savings, have built equity. It almost self-selects out to a fairly positive borrower.” The credit union will lend up to 85 percent of the listing price of the property being sold, or 90 percent if the sale is under contract.
Scudder says Pittsford FCU’s unique lending offerings match well with the organization’s overall philosophy of service. “We don’t just want to push papers and worry about Freddie Mac,” he says. “We don’t think that serves the needs of our entire membership.”
Lisa Hochgraf is a CUES senior editor.