The Credit Union Movement and Veterans

November 16, 2020 at 10:13 am Leave a comment

Veteran’s Day got me thinking about the bond between credit unions and the military. A recent survey demonstrates how that bond is alive and well, and, if you look at the history of our movement, all credit unions owe a debt of gratitude to service members. 

The survey to which I am referring underscores that credit unions are still living up to their reputation for helping members of the military. Specifically, of the 20 top lenders which provide government VA loans, Navy Federal offers the best rates. Based on analysis of HMDA data, of the VA lenders examined in 2019, 10 had a rate spread that was above the average prime offer rate. In fact, there was more than a 1.25% spread between the lowest annual percentage rate offered by Navy FCU and the highest rate offered by New Day Financial. 

You would think from the comments of some of our Congress members that the CFPB had stopped taking enforcement actions. In fact, one of its most recent settlements involved Low VA Rates, LLC. The settlement demonstrates that the substantial rate spread reflects more than the complexity of offering VA loans. Guess what? The rates weren’t quite as low as advertised. In fact, the Bureau accused the company of engaging in classic bait and switch tactics, in which it advertised low rates on VA backed mortgage products that it did not make available or in which it placed conditions which were not clearly advertised. More generally, the movement is inexorably linked to the armed forces. It is not a coincidence that so many credit unions, such as AmeriCU in Rome, NY, were founded on military bases. Once again, we owe a debt of gratitude to the Greatest Generation. The federal credit union charter was less than a decade old when the Japanese bombed Pearl Harbor. As the NCUA commented in its 1948 report, federal credit unions were encouraged to give “sympathetic consideration to borrowers who entered the military during the war.” Not all of these loans worked out well. In 1944, for example, there were 20,000 military loans “with unpaid balances totaling $1.6 million, which was nearly 5 percent of the total amount of loans outstanding.” But by 1948, almost all of these loans were repaid, and the NCUA explained that “the experience of Federal credit unions with military loans is highly gratifying, and a new chapter in the history of credit union service has been written.”

Entry filed under: Legal Watch, Mortgage Lending, Regulatory. Tags: , , , .

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Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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