The willingness to bend to make an alt-A or B deal fit is another feature of many credit unions that can be an advantage to mortgage brokers. While many banks or A-focused lenders don't accept borrowers who are self-employed, have untraditional income sources or damaged credit, these applications can often be serviced at a credit union.
Case in point: IC Savings & Credit Union, which lends in the Golden Horseshoe region of Ontario, started in the B mortgage lending space when it opened in 2000. It has since grown to include A clients, as well as commercial mortgages.
"The ability to do business in the manner that we do from A to alt-A to B is sometimes surprising to mortgage brokers because other lenders aren't able to be as flexible," says Bruce Savage, vice-president of lending services at IC Savings.
Feth agrees, saying one of the biggest perks of a credit union is their flexibility. He gives the example of a recent client who had income coming from a rental property, a part-time job and a pension. While he says he would have had to fight to get the deal done at a bank due to the income sources, the credit union made it work.
"Credit unions are far more flexible, especially on conventional deals," says Feth, adding as long as the clients don't have "terrible credit," there is likely a way to make a deal work.
Jeff Mayer, a broker at Mortgage Intelligence in Toronto, says many brokers automatically jump to a B lender if they can't get a deal done at a bank when they could be looking at a credit union for better rates. He refers to a recent deal he worked on in the Kitchener area that he couldn't get a bank lender to do. Mayer searched the Internet and sent the deal to a local credit union and was surprised to learn it didn't pull the credit score but instead only looked at the client's repayment history.
"That really helped the deal," he says, adding he secured a rate that was lower than it would have been at an alternative lender.
Rates and products
Credit unions offer a standard range of mortgage products, with the five largest institutions citing five-year fixed-rate mortgages as their most popular product. Their rates are generally in line with banks and other institutional lenders.
"Credit unions have become really competitive when it comes to interest rates, especially in the past six months - they've had some of the best rates in the lower mainland [area of Vancouver]," says Irving.
Mayer also says credit unions have offered better rates in the past few months, saying he thinks cheaper access to money and relatively low delinquency rates have made it easier for them to be competitive. On the product side, he highlights a second line of credit that he says has been a great fit for several of his clients.
"One of the biggest struggles in the mortgage industry is finding second lines of credit at a decent rate," says Mayer. "But Meridian offers a second mortgage for four per cent on a line of credit, so a lot of people are not aware of it and I guess the biggest thing is that most people are not aware that some credit unions offer this type of product."
Other credit unions can also be flexible in dividing the mortgage into a part fixed rate and part variable rate, while one of Irving's noted credit union products is the readvanceable mortgage at Vancity, which allows a borrower to increase the amount of their mortgage without having to have it rewritten.
And, like banks, credit unions offer lines of credit and other products that are in line with banks, which can be advantageous if a client wants to consolidate debt.
"Let's say a client's car payment is $600 a month and the mortgage deal doesn't qualify because the car payment is too high," Feth says. "From my experience, credit unions look for a way to make a deal work. For example, I could wrap the car loan up with other loans in a line of credit to lower the monthly payments. That's a situation where having a side loan facility is definitely an advantage."