Legislation that would vastly expand the functions of the nation's credit union - including the right to make home mortage loans - was sent the White House yesterday. The bill, which passed both houses of Congress by an overwhelming margin, is almost certain to be signed by President Carter.
For the 19 million members of 13,000 federal credit unions in this country, it will mean an opportunity to secure a mortage for up to 30 years at a shade under current nearest rates. Moreover, credit union officials said closing costs could be [WORD ILLEGIBLE] by a third. Similar advantages already are being enjoyed by 15 million members of 9,700 state-chartered credit unions.
For the large and powerful thriff in situations that supply must of the money for mortagage loans - savings and loans and savings banks - the entry of federal credit unions into the market is no more than apinprick in an elephant's hide. But the possibility the hole could grow larger has not escaped officials of the thrift industry.
"Congress has voted the entire credit union movement the most significant new powers since passage of the Federal Credit Union Act 43 years ago," declared Jim R. Williams, president of the Credit Union National Association (CUNA). State-chartered credit unions also will benefit from broader lending, savings and investment authority Congress has conferred on the federal organizations.
The primary porvisions of the act, approved Tuesday night by the House and yesterday by the Senate, include:
First mortgage loans of up to 30 years for one-to-four family dwellings. The property must be the member's principal residence and must not be priced more than 150 per cent above the median sales price in the area.
Loans for up to 15 for home improvements or for the purchase of a mobile homes.
Loans on an an unsecured basis for any amount, subject to the approval of the board of directors. The previous limit $2,500.
Revolving lines of credit and the issuance of bank-type credit cards.
In additions, members will be able to earn varying rates of return on shares (deposits) according to the length of maturity, much like certificates of deposit now offered at banks and thrift institutions. These share certificates will be insured up to $40,000.
Williams termed the act the first step toward equalization of credit unions' opportunity to compete with banks and savings institutions. He said CUNA would now work for "third party transfers" and so-called NOW accounts. Third party transfers permit someone other than the account and its us is deemed essential in electronic banking. Negotiable orders of Withdrawal are basically checking accounts paying interest.
The landmark legislation completed on Capitol Hill yesterday was fought bitterly by banks, savings and struction industry, which feared that S&L mortgage funds would dry up. The industries now have conceded the credit unions' victory and will not try to get Carter to veto the bill. However, the established financial institutions have vowed to fight any further concessions.
Last year the banking lobby successfully blocked passage of banking reform in the House, legislation that included wider credit union authority, although a similar bill slipped through the Senate. When a less extensive bill came up again this year, it passed the House by 401-4. The Senate passed an extention of Regulation Q - allowing savings institutions to offer a 0.25 per cent higher interest rate than commercial banks - by a voice vote. A conference committee incorporated the House credit union provisions.
In the metropolitan Washington area there are about 225 credit unions, including 170 federal credit unions in the District. About half a million persons living in the D.C. area are members of local credit unions with assets of about $500 million.