SECU Closes Over $5 Million of Proprietary Reverse Mortgage Product

image State Employees’ Credit Union’s (SECU’s) consumer-friendly Reverse Mortgage was introduced in August 2008 and has since closed 50 reverse mortgages totaling over $5 million according to the company’s statement.

SECU’s loan is a fixed rate product that uses simple interest accrual and has an origination fee of 1%.  Unlike the HECM, its “consumer friendly” reverse mortgage also has no mortgage insurance or monthly service fees.  SECU firmly believes the reverse mortgage market could prove to be the next subprime debacle and has worked to be ahead of the curve in order to provide a different cost effective product that other credit unions could emulate.

In developing their consumer-friendly product, the Credit Union consulted with the North Carolina Housing Finance Agency, North Carolina Commissioner of Banks, North Carolina AARP, the NC Retired Governmental Employees Association and Resources for Seniors – a counseling group for reverse mortgage applicants, for their expertise on reverse mortgages.

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“After extensive research of standard reverse mortgage products, the Credit Union developed a product far superior to the industry standard, resulting in more funds being made available to our members for their day-to-day living expenses,” said Phil Greer, Senior Vice President of SECU’s Loan Administration department.

“While this type of loan will not benefit all members, the ones who need this option can rest assured they are getting a product that will not be detrimental to their financial well-being,” said Greer.

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  • Reverse Market Insight did a product risk analysis of the NCSECU product in one of our first issues of our ReverseIQ newsletter last year. Given the latest announcement and questions raised, we’ll re-publish on our site later this month (www.rminsight.net/blog) for anyone interested.

    Bottom line is that NCSECU is guaranteeing themselves a very low return on their funds (and very easily negative returns if short term interest rates rise) and exposing their institution to substantial risk. The borrowers don’t have the benefit of FHA insurance if NCSECU were to find itself in financial distress, leaving an ambiguous situation at best for the ‘lifetime income’ guarantee they’re making if the financial markets move against the product.

  • I don’t believe the article mentions the index or the margin on their product, only that it has no servicing fee, a 1% origination fee, no MIP, and simple interest computation.

    From the looks of it, this is strictly a portfolio product, and as such will likely find no secondary market for some time to come.

  • The SECU product has a fixed interest rate (currently 6.75%) and does NOT offer a creditline option. They do offer the tenure, term, and lump sum options, as well as combinations of a monthly payment plus an initial lump sum.

    My understanding is that they have no intention of selling these loans on the secondary market. As a credit union, they are all about service to their members, and the intent was simply to offer a reverse mortgage product that would be useful to their members and offer an alternative to the HECM. For some people, as has been pointed out, it has significant advantages. The main drawback is the lack of the creditline option.

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