SECU Strikes Back on Living Trusts and Real Estate
I recently blogged about my disagreement with the North Carolina State Employees Credit Union's policy on mortgages when the property was previously held in the owner's living trust. Somehow SECU became aware of my post, sent me a letter by email objecting to my statements, which, in the interest of fairness, I thought I should share. Click "Continue Reading" for the text of the letter.
By the way, I still find SECU's policy to be unfair to those members who have living trusts, but, of course, that's only my opinion.
March 3, 2009
Dear Mr. Herman-Giddens:
I have received a copy of your comments about SECU’s policy on living trusts that recently appeared in the NC Estate Planning Blog, and would like to respond.
I feel that it is important to first state that all loans granted by SECU are funded by the collective savings dollars of our membership. We are not funded by TARP, nor by the State of N.C. Our policies and procedures are designed to protect our members from unwarranted risk of loss associated with the risky business of granting loans. It is because of our policies and procedures that we are not in the dire financial condition being experienced by so many other financial institutions today. I assume you do not find that fact to be ridiculous.
Membership in the State Employees' Credit Union is restricted by our bylaws. We do allow membership by trusts, corporations and partnerships that are composed primarily of individuals who are eligible to join. However, our Board of Directors has never authorized lending services of any type to entities other than natural persons. We do not grant loans to businesses or corporations, and clearly a trust is not a natural person. Lending to these entities requires a dramatic increase in operational expense due to our regulatory environment, and increases our exposure to loss as well.
Mr. Hill Scott properly informed you that we have no staff attorney. Our practice is to employ various attorneys from the legal community who possess the legal expertise in the issue at hand. As I am sure you understand, it is quite unreasonable to believe that a staff attorney can be an expert in all aspects of law. The very issue you raise has been reviewed by an attorney, and our policies are in sync with the legal advice we received.
It is also important to understand that the increase in expenses that you mention ($800 for attorney fee and title insurance) are not truly extra expenses when viewed in light of the typical closing costs a consumer may incur in a refinance transaction. These costs are almost 100% normal! It is regrettable that we cannot save these expenses for our member, but given the situation we would have to subject ourselves to additional risk of loss. It is also important to mention that the review of the individual trust agreement (as you mentioned) by an attorney would also entail a fee to be passed on to the borrower. Seldom do attorneys do such work for free.
I truly believe that a thorough review of the policies and procedures of the State Employees' Credit Union would reflect that we are very member oriented. We do our best to provide the highest level of service at the lowest possible cost to our members. Our annual member surveys reflect that 98% of our members are pleased with our service, practically unheard of in the financial services industry. I do not believe that your conclusion that our policy is ridiculous is particularly well founded. The fact that you do not agree with our policy (that has been reviewed by one of your peers) does not mean that it is ridiculous! We acknowledge that other institutions have different policies. WAMU had a set, Indy Mac had a set, Citi…. We like ours, because we hope to be around a while longer.
With all due respect,
Philip E Greer
Senior V.P. –Loan Administration
State Employees’ Credit Union
Mr Greer's reply makes sense to me.