WASHINGTON, DC-Last week we spoke with Andy Stafford, director of commercial real estate at the NASA Federal Credit Union. He told us that for the past three years, its commercial real estate lending portfolio has increased each year. In 2012 it saw a 23% increase in its portfolio; the year before that it was 16%. This year, he predicted, commercial real estate lending by the NASA Federal Credit Union will likely rise between 30% and 35%.
Our question to Stafford is, why exactly are these borrowers turning to a credit union instead of a lower cost lender such as conduit or a more personal channel such as relationship bank? Lots of reasons, he responded—seven, to be precise.
1: Service. Federal credit unions provide excellent customer service, Stafford says. “We have one point of contact for a borrower. If there is a question, the borrower doesn’t have to go through multiple calls or offices to get the answer—the contact will take care of it.”
“We provide a higher level of service and a more strategic interface with the borrower in terms of understanding their account and their project,” Stafford says.
2: Competitive. Credit union loans may not equal the low, low borrowing costs of CMBS, for example, but they are still competitive in general with the industry.
“We are not necessarily the lowest rate, but we are very competitive,” Stafford says. “In Washington DC, most of the commercial loans being done are in the mid-4% to low-5% or even mid-5% in terms of interest rate and that is where we are.”
3: No prepayment penalty for refinancing. Enough said.
4: Deep knowledge of local industry and players. One reason why NASA Federal Credit Union’s default rate is so low is that the underwriters have deep ties to and within the community. They understand the businesses and their needs, Stafford explains. Conversely, the borrower is usually connected to the credit union and is less likely to let a loan default. “Both borrower and lender feel obligated to the other.”
5: Federal credit unions are answerable to their members, not stockholders. By design, credit unions are nonprofit financial institutions charged with responsibility of serving membership, Stafford says.
“Other lenders answer to the stockholder and many times a borrower will find it is at odds with the stockholders’ interests.”
6: Speed. Loans can close in from 30 to 60 days, Stafford says.
He tells of a developer that came to NASA Federal Credit Union in the fourth quarter with a request to close by year’s end. “He had other credit swap default instruments in place that would have had major tax ramifications if that deadline wasn’t met.” The credit union was able to give the borrower a definitive answer that it would refinance the loan within 10 business days, and then closed on time.
7: Certainty.“When we tell you we will do a loan, we will do it—and in the time frame and terms and structure that borrower and lender initially agreed.” For an illustration as to why that is important, see above.
GlobeSt.com and NASA Federal Credit Union are hosting a webinar, “Lending Alternatives You Can Bank On,” on Nov. 4 at 1 pm ET. To attend, register here.