Wednesday, April 24, 2013

Navy's 100% LTV Mortgage -- Phenomenal or Ridiculous Product?

The business press is beginning to scrutinize Navy FCU's mortgage practice of providing 100 percent financing without private mortgage insurance.

The latest iteration is an article in the Washington Business Journal (paid subscription).

"Looking for signs of a housing bubble? Check this out: Vienna-based Navy Federal Credit Union is marketing 100 percent financing, no-money-down mortgages."

Katie Miller, VP of mortgage products, says "this product is phenomenal for homebuyers," but Jerry Hanweck, a professor of finance at George Mason University, said "that's ridiculous" and the product "defies the basic rules of good real estate lending."

According to the article, Navy originated $740 million of these 100 percent LTV mortgages in 2012 and two-third of the borrowers were first time home buyers.
Posted by at
Labels:

4 comments:

  1. AnonymousApril 24, 2013 at 12:08 PM

    Keith - Does the NCUA's NCUSIF have enough in reserve to cover NAVY FCU in the event it goes kaput? Hoping they are too big to fail. But, just in case does the NCUSIF have enough coverage? Will GAAP allow the entire credit union community to start reserving now for the NCUSIF assessment on this soon to burst bubble?

    ReplyDelete
  2. Keith LeggettApril 24, 2013 at 12:29 PM

    Navy has almost $54.3 billion in assets. The NCUSIF has a net position of $11.3 billion.

    To your comment on being too big to fail, Debbie Matz stated in a Bloomberg article that it is unlikely that Navy FCU will be designated as a nonbank SIFI.

    ReplyDelete
    Replies
    1. AnonymousApril 24, 2013 at 1:54 PM

      NCUSIF's net position of $11.3 billion, is before those pesky legacy assets are considered isn't it? That fund is still in the hole.

      Delete
    2. AnonymousApril 24, 2013 at 1:57 PM

      Clearly Navy should be considered a SIFI as far as NCUA is concerned. I guess that's one of the perqs (of Matz) having a vote in FSOC meetings.

      Delete

Subscribe to: Post Comments (Atom)
 

The content is provided for educational purposes only, with the understanding that neither the authors, contributors, nor the publishers of this site are engaged in rendering legal, accounting or other expert or professional services. If legal or other expert assistance is required, the services of a competent professional should be sought.

Comments appearing in response to articles appearing on this site do not necessarily reflect the views of the ABA. ABA makes no representations regarding the truth or accuracy of commentary or opinions that may be posted in response to the articles that appear on this website.

The inclusion herein of any link to a website, either in the text of an article or in a comment, does not denote any approval, sponsorship, or endorsement by the ABA, and ABA is not responsible for the content or opinions expressed on those linked websites or related commentary. This content is not licensed to third parties sites and is not affiliated with any third party site. Any reference to the author or this content on any third party site on the Internet is not authorized by the ABA.

It is the policy of the American Bankers Association to comply fully with all antitrust laws. Certain discussions should be considered off-limits, including those that contain competitively sensitive data such as price and cost information, or statements that could be construed as reflecting an attempt or desire to control or influence a particular market or markets. Future pricing or other prospective competitive information should never be shared.