PenFed Retools First-Time Homebuyer Program

People who expect to buy a house in the next 12 months are more likely to worry about their personal economic prospects than interest rates, and more likely than not to be a buying one for the first time, according to survey released Tuesday by the nation’s third-largest credit union.

Pentagon Federal Credit Union of Tysons, Va. ($24.4 billion, $1.8 million members) found 40% of adults report personal finances or job stability as the top decision-making factors when considering a new home purchase, compared with 37% who cite low interest rates.

The survey’s results helped support PenFed’s decision to revise its first-time homebuyers’ program to allow lower down payments, and to add other features to reduce other costs and allay common worries.

The program also comes as PenFed originated $989.8 million in real estate loans in the first six months of 2019, down 49.5% from 2018′s first half.

PenFed hired Morning Consult, a polling firm founded in Washington, D.C. in 2013, to probe consumer sentiments and knowledge surrounding mortgages and home buying options.

“At PenFed, we prioritize understanding consumer concerns so we can tailor products to meet those concerns and help consumers accomplish their goals,” said Lisa Cookson, PenFed’s SVP of mortgage operations and home equity. “Our annual mortgage survey helps us identify the most relevant trends, questions and motivations that influence potential homebuyers.”

Among the 2,200 adults surveyed online from July 19-22:

• 35% considering buying a home said they would prefer to finance through a credit union, compared with 41% through a bank and 14% from QuickenLoans LendingTree and other lending-specific companies.
• 73% said down payment requirements were important when deciding on a specific lender.
• 59% said knowing about Private Mortgage Insurance (PMI) coverage would impact their decision to choose a specific lender.

Among those not planning to buy a home in the next year:

• 42% said they were happy in their current living situation
• 30% cited inability to afford a down payment
• 19% cited personal finances
• 4% cited job insecurity
• 3% cited fear of an economic recession
• 1% cited a housing shortage

Cookson said one of the most surprising findings was that 61% of those intending to buy would be first-time homebuyers, a number far higher than normal.

Responses from the prospective first-time buyers led PenFed to revise its program to allow down payments as low as 3% with lender-paid PMI. It also provides a “Peace of Mind” job loss benefit to help borrowers meet payments for up to six months after an unexpected, involuntary job loss that occurs within the first two years of the mortgage.

“For a lot of first-time homebuyers, the fear of the unknown is a bit overwhelming,” she said. “In the survey we learned job security was one of the top factors in their finance concerns.”

PenFed’s second-quarter call report posted last week by NCUA shows that first mortgages were the biggest contributor to its originations decline. In the three months that ended June 30, first mortgage originations were $310.8 million, down 60.5%. Second liens fell 1.9% to $254 million.

PenFed’s non-real estate originations rose 4.3% to $1.7 billion, leaving its total second-quarter originations down 15.2% to $2.3 billion.

The second-quarter declines followed even sharper drops in the first quarter. Real estate originations fell 53.5% to $425 million in the first quarter, while other originations were flat.