Loan Policy

loan policy near oswego ny from compass fcu

Revised May 2020

PURPOSE: To provide policy and procedure guidelines to loan officers and personnel in the processing of loans.

POLICY: It is the intent of Compass FCU to grant loans to members regardless of race, color, religion, national origin, sex, marital status, or age (provided the applicant is old enough and otherwise has the legal authority to enter into a binding contract). The loan policy is to ensure that no preferential treatment shall be given. All loan applications will be based on credit worthiness and the likelihood of repayment.

This policy is a working guideline for loan officers and personnel and is not all-inclusive. This policy will not fit every situation and there may be valid reasons to deviate from policy.

In all cases, Compass FCU will comply with the Credit Union Act, NCUA's Regulations, and all other applicable laws and regulations including, but not limited to: the Consumer Protection Act, Regulation Z (Truth-In-Lending), Real Estate Settlement Procedures Act (RESPA), Equal Credit Opportunity Act (ECOA), Fair Housing Act, Regulation C (Home Mortgage Disclosure Act), National Flood Insurance Reform Act of 1994 Fair Credit Reporting Act, Bankruptcy Reform Act, the Right to Financial Privacy Act and the Military Lending Act.

All transactions conducted by the Credit Union must be considered confidential. The welfare and privacy of the Credit Union, membership and borrower relies in the professionalism that must be maintained when conducting any credit union business. This means under no circumstances can any part of a loan transaction be publicized, written or verbally, to any non-official of the Credit Union.

LOAN TYPES:

PROCEDURES:

Who May Borrow: This Credit Union is established for the benefit of its members, and thus only qualified members can borrow. A person qualifies for consideration of a loan if they are within the field of membership, have been accepted for membership, have purchased the first installment on a share and are in good standing with the Credit Union. New members with a credit score lower than 640 (B credit) will be limited to $5,000 total unsecured loans in the first year.

As per 701.21(c) (5) loans to a member cannot exceed 10% of the credit union's unimpaired capital. There is no limit on the number of loans a member can have at one time.

Loans to Officials: Loans made to or guaranteed by officials (over $20,000 plus pledged shares) and loans made to other organizations require board approval after being acted upon by the loan officer. An official is defined as any member of the Board of Directors, volunteer loan officers and Supervisory committee members.

Loan Officers: The loan officer has the authority to approve or deny all loan requests. The loan officer will act within the boundaries of the law and the credit policies/procedures established by the Board of Directors here in after. The Board is responsible for the actions of the loan officers, however, the board does not have the authority to overturn or modify any loan decision made by a loan officer.

When a declined loan is resubmitted for approval, only the original loan officer, who rejected the loan, can approve it, unless that loan officer is unavailable. However, the Board of Directors will review all written appeals of members whose applications have been denied.

Loan Applications: A loan officer must review the following items when applicable when a loan application is requested: The loan amount, the security offered (if any), the total monthly amount of financial obligation, the monthly income (only include spouse's income if the spouse is a joint borrower or co-applicant), the credit history, if the application is filled out completely,and confirm the debt to income ratio.

Refinancing: Refinanced personal loans require $500 in new money. Refinanced home equity loans require $10,000 in new money. The credit union will refinance any non home loan for our members at anytime at a more favorable rate, provided the member cleans up any discrepancies in their credit report which improves their overall score. There will be a $25 charge for each loan to be considered for refinancing at the present rate, based on their FICO score.

If the purpose of this loan is debt consolidation and the debt ratio is over 40% the check will be made payable to the creditor(s). The applicant should provide the creditors phone number and a copy of the bill with their application so the credit union can verify the payoff amount and close the account.

The maximum money loaned to refinance a vehicle cannot exceed 115% of its NADA retail book value plus any life and disability insurance amounts. When a loan exceeds the book value, one and a half percent (1.5%) will be added to the posted rate.

Members with newly purchased secure loans financed at another institution and brought to the credit union within six (6) months will be given the new loan rates. A copy of the original contract must be turned in with the application to determine if there is negative equity in the loan due to the trade in credit being less than what was owned on it. If there is negative equity, we must obtain the NADA retail value to determine how much may be financed on the vehicle. The loan term cannot exceed the maximum term allowed minus the number of monthly payments that have already been made on the vehicle.

Credit Analysis: The following debt ratio may be used in determining the member's ability to repay the loan. Rent and mortgage payments are included as short-term debts. For the purposes of computing this ratio, living expenses, including utilities and grocery payments, and co-signed student loans are ignored. Income that is based on commissions must submit twp years of taxes, which will be averaged. If earning commission for less than two years, two loan officers must approve and member must be on the job and receiving commissions for at least six consecutive months. Rental income may be included as part of monthly income, we will take 75% of lease amounts or 100% of rental income reported on income tax after deductions. Debt ratio equals the total monthly debt payments divided by monthly-adjusted gross income, times one hundred. A general guideline for granting a loan is good credit history. When an exception is made, a note should be written on the application specifying the exception made and why.

If the applicants debt to income ratio is 45% or less, only one loan officer's signature is needed to approve loans up to to $25,000 with the exception of Debt Consolidation, Home Equity, HELOC and mortgages which require two signatures. All loans that do not fall within these guidelines require two signatures. When the applicant's debt to income ratio exceeds 45% a manager must approve them.

If the purpose of the loan is debt consolidation and the debt ratio is over 40% the check will be made payable to the creditor(s). The applicant should provide the creditors phone number and a copy of the bill with their application so the credit union can verify the payoff amount and close the account.

Credit Scoring: We will use the members' Fair Isaacs Credit (FICO) Score to determine the rates for our some of our loan products.Whenever there is a joint borrower or co-applicant, the credit score will be based on the higher of the two scores. When there is an applicant and co-signer or guarantor, the credit score will be based on the applicant's score only. If the applicant does not have a credit score, the credit union will assign a score of "C" for rate purposes and the member will be limited to $5,000 in unsecured debt.

Repayment Ability: Any member, with a debt ratio of 45% or greater when applicable, is generally considered a risk and that problems could be present and loan could be declined. Individual circumstances will be looked at upon member's request

Any credit union member may be considered a risk if there is a judgment, charge-off, or collection account against that person. If the credit check alleges that a financial judgment, charge-off, or collection account exists, and the member contests the credibility of the credit check, the member must provide in writing a disclaimer and any supporting documents. The burden of proof is on the member.

Bankruptcy Procedures: Members who have filed bankruptcy but have not caused the Credit Union a loss will be considered for secured loans at any time. If member's bankruptcy has been dischared for more than 15 years, it will be disregarded. If there is a dismissal, due to failure to comply with the original bankruptcy, then it will be counted.

Single Filers: Members who have filed Bankruptcy a single time are eligible for unsecured loans (Excluding Holiday Special and Spring Special) in the amount equal to 1/4 of the unsecured loan limit immediately after their confirmation date on chapter 13 or during the first two (2) years following the chapter 7 discharge date. In addition, during the next three (3) subsequent years, members will be considered for an unsecured loan (Excluding Holiday Loan and Spring Loan Specials) in the amount of 1/2 of the unsecured loan limit. The debt-to-income ratio must be 40% or below for the first five years following the confirmation/discharge date.

Multiple Filers: Members who have filed twice: May finance up to 80% of the value of the collateral for a Secured Loan at any time. For the first two years following the last discharge date, the combined unsecured loan limits (excluding holiday special and spring special) may not exceed 1/4 of the unsecured loan limit allowable to members that have never filed bankruptcy, and ½ of the unsecured loan limits for all years thereafter. The maximum limit for a VISA account is $2500.00, higher amounts must be secured by shares or a qualified co-signer. The maximum allowable Debt/Income ratio is 40%.

Members who have filed three or more times: Members will not be eligible to have any new loans at the credit union.

The only exception to this is for 90 day notes to pay off retirement plan loans. Members must be at the credit union and initiate the payoff and borrowing of the new loan. Retirement plan loan proceeds must be deposited into the Compass FCU account. Debt ratio rules will not apply.

Bankrupt members may also receive a Novelis Corporation co-signed loan at any time.

TYPE OF LENDING

Closed and open-ended loans are currently available to the membership. A closed end application is completed as a single loan and if a member wants to borrow additional funds a new loan application has to be filled out. A Truth-In-Lending disclosure is made for each loan.

An open-ended application is completed as a revolving credit loan and the Truth-In-Lending disclosure is given at the time of application.

UNSECURED LOANS: An unsecured loan is one that is made without any collateral and is based solely on the character of the borrower. (See Credit Analysis section.) See Appendix B, "Compass FCU Interest Rates" for rates and terms on unsecured loans 1-6 listed below:

(1)Personal Loans: Minimum payments are $50.
FICO score 680 and above maximum of $20,000 for up to 84 months
FICO score 640-679 maximum $15,000 for up to 72 months
FICO score 639 and below maximum of $12,000 for up to 60 months

(2)Type II: A maximum of $1,500 for one year and may not be refinanced. Minimum payments are $50.00.

(3)Classic Visa Card: The maximum line of credit allowed is $10,000. If debt to income ratio is calculated, monthly payments of 2.25% of maximum dollar applied for or $25, whichever is greater, needs to be included. Regular monthly payments are calculated at 2.25% of the outstanding balance or $25, whichever is greater. Late fees and over the limit fees are $20. There is no annual fee.

(4)Junior Visa Card: This card is offered to members age 16 and older while attending school. All applicants require a qualified co-applicant unless they are age 18 or over, are permanent residents of the United States and have a stable job. The maximum credit limit is $500. Late fees and over the limit fees are $1. Credit reports and debt to income ratios are not taken into consideration.

Regular monthly payments are calculated at 2.25% of the outstanding balance or $10, whichever is greater. The interest rate is the same as the Classic Visa card.

(5) Visa Platinum Credit Card: The maximum line of credit for Visa platinum credit cards is based on credit score as follows: The minimum FICO score must be 640 (B) and above. The maximum credit limit is up to $15,000

Monthly payments are 2.25% of the outstanding balance or $25.00, whichever is greater. Late and over the limit fees are $20.00. A monthly payment of 2.25% of the line of credit or $25.00, whichever is greater, is to be used when calculating the debt ratio.

(6) Visa Platinum Credit Card w/Rewards: The guidelines are the same as Visa platinum credit cards except the interest rate for purchases and cash advances is 1% higher that the regular Visa platinum. Visa platinum cards with rewards earn 1 point for every dollar spent except ATM withdrawals or cash advances. Points can be redeemed for cash, gift cards, or travel including airfare, hotel, or car rentals. Reward points expire after 48 months.

Members may have more than one Visa credit card type, however, the combined line of credit for both cards can not exceed the maximum limit of the platinum card for which they qualify.

(7)90-Day Notes: Qualified members may borrow up to $20,000. There is a non-refundable $25 application fee. Should member fail to repay in full after 90 days this note will be converted to a 4-year loan at the same rate. If note is converted it may not be refinanced. Debt ratio will be waived for members borrowing to pay off retirement loans. Members must be at the credit union and initiate the payoff and borrowing of the new loan. Retirement plan loan proceeds must be deposited into the Compass FCU account.

(8)Student Loans: See policy below

2. SECURED LOANS: Secured loans are where the borrower pledges as security something of value equal to or greater than loan amount, and can be sold should the member default on their loan obligation. All secured loans for the purchase of consumer goods require a signed purchase offer or bill of sale. It must include the make, model and serial number of the goods being purchased when the application is submitted. A copy of the Certificate of Title must be presented for used cars, trucks, etc. purchased from individuals. Salvaged titles are not eligible as collateral. First liens only will be accepted for car, truck, boat, motorcycle, camper and recreational vehicle loans and required insurance coverage (collision and comprehensive) must be carried. Collision insurance coverage for car and truck loans under $2000 is not required.

The Credit Union will place an interest in the collateral by filing a MV901 lien on any item that has a Certificate of Title, UCC-1 for other personal items or a Mortgage if a home is used as collateral. Also, a member may pledge as security their Credit Union shares as a secured loan.

A member may exceed maximum loans amounts set for the purpose of: life insurance, disability insurance, vehicle service contracts, closing costs, and tax and registration fees. Minimum payments for secured loans are $100.00.

SEE Interest Rates FOR RATES AND TERMS ON SECURED LOANS 1-11 LISTED BELOW:

1. Cars, Trucks, Motorcycles, Boats and Campers: 100% of sales market price not to exceed 115% of the NADA retail value. (See Refinancing on pp.3-4) When a member has a trade in on a new purchase, the dealer must provide the dealer invoice with the purchase order for the vehicle.

2. Collector Cars: 100% of CPI book value. A picture of the car is required.

3. Recreational Vehicles: 100% of sales market price not to exceed the NADA retail value. RV's include snowmobiles, ATVs, side-by-sides, haulers and jet skis.

4. Tractors: 12 horsepower and up are available up to 100% of sales market price.

5. Mobile Home Purchase: Members may purchase land with the mobile home. Mobile homes should be on a permanent foundation; however, consideration will be given to loans for trailers standing on footers with no wheels or trailer hitch. A member may finance up to 80% of the purchase price or the appraised value, whichever is lower.

Compass must be First Lien Holder. The maximum term on mobile home loans is 20-years and the interest rate will be 2% over the credit union mortgage rate. Applicant must pay for the appraisal, search and all applicable closing costs.

6. Home Equity Loans: The Credit Union will only be first or second Lienholder on a property. If there is one lien on the property, the loan amount cannot exceed 90% of the appraised value less the outstanding balance owed to the first lien holder. (For Mobile Homes 80% LTV and add 2.00% to the Home Equity Rate). The value of the house will be taken from a recent tax bill. Otherwise, the member must pay for certified walk-thru appraisal. $10,000 new money is required on new and refinanced home equity loans. The Credit Union will not finance income property. Home Equity loans may have maturities of up to 20-years. However, on non-primary residences the term is limited to 12-years. Applicants must pay all associated pass thru costs. Member may be required to submit a copy of the deed, a survey, current paid tax receipts, current pay stub, homeowner’s insurance certificate and a picture of the house. The Debt/Income ratio should not exceed 40% of monthly gross income. Mortgage and home equity payments cannot exceed 30% of monthly gross income. A lien will be taken on the property.

7. Home Equity Line of Credit Loans: Members may have a line of credit of $10,000 or more when pledging their primary residence as collateral. The line of credit amount cannot exceed 80% of the appraised value less the outstanding balance owed to the first lien holder. This will be a variable rate loan based on prime plus one, adjusted on the first day of each year. Prime rate will be determined by what is published in the Wall Street Journal Money Rate Table as of November 1st. The floor will be 5.0% and the cap will be 15.0%. The maximum term is 20 years. Draws may be taken for up to 5 years from the original loan date. The minimum cash advance amount will be $500. The minimum monthly payment is $100 and will be adjusted each month in which an advance is taken. The member must pay all costs directly associated with the loan including appraisal, search, mortgage tax and recording fee. (The member will also pay for the survey, abstract update and title insurance if recommended by legal counsel.) Escrow is not required. Member are required to submit a copy of the deed, a survey, current paid tax receipts, current pay stub, homeowner’s insurance certificate, and a picture of the house at the time of application.

8. CUC Mortgages: will be made available to members with maturities up to 30 years. These loans are secured by a first lien in favor of the Credit Union. We will participate in the Credit Union Center Mortgage Corporation (CUCMC) program.

Loans for investment purposes, (non-owner occupied) may not exceed 70% of the sales price or appraised value, whichever is lower

9. Compass FCU Mortgages:

Mortgages will be processed and serviced by the Compass Federal Credit Union (Compass FCU) for members when funds are available and the following conditions are met:

The minimum mortgage amount is $15,000.
Loans for primary residences cannot exceed 95% of the sale price or the appraised value whichever is lower. However, if the appraised value is more than the sale price and the member wants more than 95% of the sale price, they will be allowed to borrow 80% of the appraised value.
Loans for secondary residences and camps cannot exceed 90% of the sales price or appraised value whichever is lower.
Total amount financed for new purchases and refinanced loans cannot exceed 95% of the appraised value (including closing costs).
The amount borrowed for refinanced loans with cash out cannot exceed 80% of the appraised value excluding closing costs. However, when there is no cash out of the mortgage proceeds then the member may borrow 95% of the appraised value for a refinanced loan.
The applicant’s debt to income ratio must be 43% or lower and the Mortgage Ratio 30% or lower.
The maximum term is 30 years.
Compass FCU must be first lien holder on all mortgages.
Private Mortgage Insurance (PMI) will be required when the loan to value 80% or more.
The borrower must carry homeowner’s insurance equal or greater to the amount borrowed.
Compass FCU will not hold Escrow accounts for mortgages unless the borrower is negligent in paying their taxes
Title Insurance may be required.
The interest rate will be set by daily rates as provided by Owners Choice.

Estimated Fees for Compass FCU Mortgages:

Appraisal - $325
Attorney - $450
Origination - .5% of the loan amount, not to exceed $2,000
Recording - TBD
Tax Affidavit - TBD
Mortgage Tax - .75% of Mortgage less $25
Private Mortgage Insurance - Based on loan amount/may not be required
Title Insurance - TBD
Flood Certification and Abstract Update - $11.50 and Abstract TBD

*Borrower (s) may lower their monthly payment by making a one-time payment (minimum of $10,000.00) against their mortgage. The loan rate remains the same and there is a $100.00 fee for rewriting the lending agreement.

10. Construction Loans - are offered to members building a home as their primary residence. Members with a credit score of 700 or better may borrow up to 90% of the purchase price of their construction project and land; members must qualify and purchase PMI if they are borrowing over 80%. Members with credit score below 700 may only borrow 80% of the purchase price of their construction project and land. The maximum term is 30 years and the interest rate will be the same as the residential mortgage rate. The interest rate will be locked in at the time of application.

Borrowers are required to submit a copy of the signed purchase agreement, a diagram of their building plans, detailed estimates of all materials needed to complete the building, deed, survey, current tax receipts, pay stub, building permit and builders insurance certificate.

There will be one closing for the full amount of the mortgage with the funds being held in escrow for disbursement according to the following scheduled for the project:

First disbursement to purchase the land. (If you already own the land your first disbursement will follow the completion of the foundation.)
Disburse 30% of the original mortgage amount after the foundation is completed.
Disburse 30% of the original mortgage less the amount disbursed for the land after framing (interior and exterior) and roof is completed (shingled or metal roof installed).
Disburse 30% of the original mortgage less the amount disbursed for the land after the sheetrock is taped and mudded, rough plumbing, windows, doors and electrical is completed.
The balance of the mortgage will be disbursed once painting, exterior finish is complete (siding, paint, etc.) and Proof of Certificate of Occupancy is received.

The contractor must agree to this funding schedule. There will be an inspection of the site at each construction stage to certify that the work is completed and a project completion report is to be signed by the inspector/appraiser prior to an advance.

If additional money is needed to complete the project then the entire loan will be refinanced at the current mortgage rate. Under no circumstances will the loan amount exceed the 80% / 90% loan to value. A detailed estimate of all materials needed to complete the building will be required before additional funds will be disbursed.

The applicant will pay ½ point for the loan origination and all pass through costs associated with the loan. This includes appraisals, attorney fees, mortgage tax, recording fees, flood certification, survey, abstract update, private mortgage insurance if applicable and title insurance if recommended by legal counsel. A good faith estimate of costs will be provided to the applicant after the application is received.

11. Property Loans: For the purchase of land with no standing structures. Members may borrow 90% of the appraised value or purchase price, whichever is lower.

The credit union must be the first lien holder on the property.

The borrower must pay for the tax search and appraisal at the time of the application. The borrower is also responsible for the attorney fee, the recording fees and filing fees, which may be rolled into the amount of the loan. Proof of homeowners or tenant liability insurance will be required.

12. Secured Personal Loans: is offered up to 90% of value of collateral being offered to a maximum of $20,000.

13. Shared Secured Loans: are fully secured by shares (passbook loans) will have an annual percentage rate of two percent, 2% over the member's savings or certificate account rate. Pledges against shares (or certificates) decrease as loan balance decreases.

Note: Interest Rates: Loan rates are reviewed periodically and subject to change.

Any Shared VISA will have a 3% Fixed Rate for Purchases, CAsh Advances and Balance Transfers.

STUDENT LOAN POLICY

PURPOSE: To provide guidelines for administering student loans to members.

POLICY STATEMENT: It is the intent of Compass FCU to provide a student loan program that allows the Credit Union member and/or immediate family (sons, daughters, spouse) the opportunity for higher education.

The program is constructed to help ease the financial burden of the family while the student is attending school. The joint parent, student loan offers deferred principal payments and a chance for students to build credit history after graduating.

Higher education refers to: a two (2) year community or junior college; a four (4) year college or university; a graduate school; or a vocational school. The school must be an accredited institution that grants a degree or certificate upon graduating.

As of May 17th, 2012 members may now apply for a onetime loan for up to $15,000 in order to attend training for a skilled profession (Ex. Lineman, Massage Therapist, Tractor Trailer School, etc.) This does not have to be an accredited institution and the payback will be the same as standard student loans.

The student loan approval resides with the Compass FCU Loan Officers, who will determine credit worthiness.

TYPE OF LOAN: The student loan is a two-part, fixed rate, deferred payment and unsecured loan to the student with a co-signer. Therefore, interest payments must be made and the loan will not be in default as long as the student is enrolled in school and participating as a full-time student. A full-time student is determined by the school attended.

A minimum loan amount of $1,000 and a maximum of $6,000 per semester can be granted for students enrolled full time. Students currently enrolled part time in an accredited institution may borrow $3000.00 per semester. The total aggregate amount of loan per student is $35,000.00.

Once repayment of principle begins, the maximum repayment term is 12 years, depending on the loan balance.

ELIGIBILITY: The student must submit proof of enrollment, a completed application, and a cosigner application to apply for a student loan. Also, the student must provide documentation annually which proves full time enrollment or part-time enrollment if they are continuing their education. If the student does not comply then the loan is payable immediately. Financially self-sufficient students with a debt ratio under 45% will be eligible for a student loan with no co-signer. Self-sufficient means that you claim yourself as a dependent on your income taxes and no one else claims you. Members who apply without a co-signer will have the converted principle and interest payment calculated and included in their ratio in order to be qualified for the student loan.

Any member applying without a co-signer must be able to qualify with principle and interest payments at the time of application.

CO-SIGNER: If a co-signer is required on the student loan at the time the money is disbursed, a co-signer will be required on the student loan for the first two years after the loan has been converted. After the two years of making full payments the student may try to qualify on their own merit to release the co-signer. In order for the student to qualify on their own, they must meet all of the standard loan requirements. This includes a good credit history and a debt/income ratio lower than 45% at the time of re-application. If the student does not qualify on their own merit after the two years, they cannot re-apply on their own until half of the original term of the loan is up.

DEFERMENT PAYMENT PLAN: While the student is in school, payments equivalent to simple interest on the unpaid balance is due monthly. The monthly interest payment will be set at the amount equivalent to 31 days. This will keep the payment fixed throughout the year. When there is less than 31 days from the last payment the difference in interest payments will be applied to the principal, (i.e. February).

Regular loan payments of principal and interest start after the student graduates, leaves school or fails to document full time enrollment in an accredited educational institution. Repayment must begin within 6 months of graduation or 6 months after the student leaves school. All student loans in repayment will have a minimum payment of $100 per month. The maximum term of the loan will be 8 years for balances up to $10,000; 10 years for balances $10,001 to $20,000 and 12 years for balance over $20,000.

Students attending school for further education beyond a bachelor’s degree, (part-time or full-time) will be allowed to make interest only payments on their student loans.

At any time after the disbursement of funds, payments can be made to the principal with no penalty. A late charge may be assessed for any student loan which is 15 days past due.

INTEREST RATES: It is the CU position to maintain competitive interest rates within the local community. The Board of Directors determines interest rates. All Student Loans will have a fixed interest rate, which may change any time the loan is refinanced.

DEFAULT: If after graduation, or after leaving school the student fails to make a monthly payment within 30 days of the due date, the co-signer is liable to make payments. The student and their cosigner are jointly liable on the student loan and both parties are required to sign all loan documents.

LOAN DISBURSEMENT: Loan funds must be used solely for the expenses associated with attendance at the school named in the loan application. If there is a change in educational institution, the credit union must be notified of the change in writing. The credit union reserves the right to cancel the loan if the change is reported or if the educational institution is not accredited.

Whenever possible, Checks from the credit union will be made out jointly, payable to the student and to the second parties for related educational expenses.

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