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Credit unions aren't the most trusted institution for mortgages

(3/26/2012) Erate Exclusive - With all the bank dumping going on you'd think consumers had their minds made up about what financial institutions to trust.

But no, when Survey Sampling International randomly queried 300 consumers in an opt-in survey about faith in mortgage lenders, consumers put the most trust in banks, rather than credit unions.

Higher bank fees and poor customer service recently spawned a grass roots "Dump Your Bank" movement that found consumers leaving large banking institutions for credit unions and smaller regional and community banks.

Survey Sampling's study says many consumers still trust the big box banks.

Results revealed about 1 in 3 consumer surveyed trusted banks the most, and less than 1 in 3 trusted credit unions most. However, both banks and credit unions got a big nod over other lender types including mortgage brokers and federal lending institutions, including Fannie Mae and Freddie Mac.

FreeScore.com, a credit monitoring service company, which commissioned the study said a majority of banks and credit unions ultimately sell most, if not all, of their loans to Fannie Mae or Freddie Mac, but most consumers aren't aware of this information.

Consumers tend to believe whichever entity took their initial loan application is the actual lender, be it the mortgage broker, bank, credit union, or government agency.

The study also included a surprising find - 22 percent of consumers queried did not know any of their credit scores before applying for a home loan.

Gasp

That's akin to blasphemy in the mortgage application world.

If you take a look at your credit report and credit score before applying for a mortgage, you have an opportunity to fix errors or clean up bad credit, before the lender has a crack at your application.

If you don't you could unnecessary lose the loan or pay a higher interest rate and other costs than would have been necessary if you took the time to be proactive about your credit report and score.

A free copy of your credit report is available every year, one each from Equifax, Experian and TransUnion, through AnnualCreditReport.com, the only federally-sanctioned source of no-strings-attached free reports.

Another surprising find - more than 20 percent of respondents selected "none of the above" when asked to choose which entity they preferred to deal with for a loan, be it banks, mortgage brokers, or credit unions.

That could reflect widespread distrust and negative public sentiment about all mortgage lenders, given the housing crash left many foreclosed home buyers as well as surviving homeowners with smaller credit scores.

"While trust of lenders is a factor, consumers must approach lenders prepared. It means knowing your credit scores before you seek a mortgage. Knowing your credit scores and information is key to understanding if you qualify for the best rates," said Carrie Coghill, director of consumer education for FreeScore.com.

"It is imperative consumers check and monitor all three scores, in addition to ensuring their credit information from each of the bureaus is correct. It takes just one bad score for a lender to reject a loan. Misinformation in your credit report can also impede your ability to secure a better rate. So, before you trust a lender, put trust in yourself first to know your financial situation," Coghill added.

Here are the survey questions and responses.

Q. If you were applying for a home loan, which type of institution do you trust the most?
  • Bank, 33.44 percent.
  • Credit Union, 30.65 percent.
  • Mortgage broker, 8.36 percent.
  • Government lending institution like Fannie Mae, 6.81 percent.
  • None of the above, 20.74 percent.
Q. In applying for a home mortgage, did you know your credit scores before you applied?
  • I did not know my scores, 22.91 percent.
  • I knew all my scores, 28.48 percent.
  • I knew two of my scores, 7.74 percent.
  • I knew one of my scores, 14.24 percent.
  • I never applied for a mortgage, 26.63 percent.

 

 

 

 

 

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