Conference 7.286::dcu

Note:  When you get a home equity loan through DCU, they automatically 
close your CRT account and replace it with the H.E line.  Thus, when 
you overdraft your account, you are now drawing down cash against your 
house.

Given the number of ways a regular checking acct can be abused (stolen
checks, Money One error, ATM error, etc) Isn't this a little -too-
convenient? 

    I agree with .1.  DCU should allow you, "the customer", the option
    of where you want funds to cover overdrafts to be drawn from.  If
    I have sufficient funds in savings I DON'T want them to draw from
    my home equity.
    
    Thanks for bringing this to my attention.  I'm going to call DCU
    to see if something can be done.
    

    I like to thank all that wrote DCU equity loans notes,now I was
    thinking about one but now I don`t know if I want one.
    I`ll check this out first/it is hot in the fire with your eyes closed.
    
        thanks,,,gus
    

DCU is now offering home equity loans with free legal fees and a $300
kickback.  assumedly this makes the net cost of getting the loan 0 or
less?  If so, they are finally competitive with other banks in loan
fees (e.g., many banks still offer FREE H.E. loans). 

On the other hand, whereas most banks offer rates at 1.5-2 pts over 
prime, DCU is offering the 10yr T-bill rate +3 pts.  Any ideas on how 
this compares?

     A few months ago, I got tired of repaying my DCU Home Equity loan by
check via first class mail every month, so I started repaying by weekly
payroll deductions.  The only catch was that I had to set up a deduction
for 1/4 (per week) of 1.5% of the MAXIMUM authorized amount, rather than
some lesser figure (but I figured I'd pay it off faster that way). 
     Today I happened to be on the phone with DCU, and I asked them if the 
deductions were applied to the loan every week.  The fella said that it was 
'put aside' until it was finally applied once per month.

     Is this true?  If so, then why does the monthly statement show multiple 
entries with separate interest calculations, one per week?  And why don't I
earn interest on it until it's applied? 
     Anybody have the facts?

    re: .5
    
    I believe some of the replies in 43.* allude to this practice. 
    Your description seems to match the experience of others in this
    regard.
    
    -- Russ

    The advantage of many credit unions is the ability to make AND HAVE
    CREDITED weekly loan payments, thus lowering the overall cost of
    borrowing.  The employees' credit union at my last employer offered
    that service, and it does make a BIG difference in total borrowing
    costs, even at the same interest rate, since you're reducing the
    principal balance faster.
    
    DCU holds your weekly payments, and credits once per month.  As
    I understand it, your payments are held in your share 1 account,
    thus earning the meager interest offered there.

For anyone considering repaying a DCU Home Equity loan by payroll deduction, 
please consider the following, which I learned the hard way:

1.  The weekly DEC payroll deduction (expressed as a monthly figure) must be
equal to 1.5% of the MAXIMUM amount authorized, NOT 1.5% of the amount you
have borrowed to date.  [You may recall that the minimum monthly payment is
1.5% of the outstanding balance.] 

2.  The money from the weekly payroll deductions is held in a loan escrow 
account until your monthly payment is due.  It is only then applied to the 
loan --- once a month.

3.  Only an amount equal to 1.5% of the outstanding balance (the MINIMUM 
payment) will be applied to the loan; the balance will go into shares as the 
escrow account is 'swept' (emptied) once a month.

Let's take an example:

     Fred has an outstanding H.E. line-of-credit of $50K, against which he has
borrowed $20K for a car.  He is currently liable to repay at the rate of $300
(1.5% of 20K) per month; he may, of course, pay more if he likes.
     Tired of licking stamps, he decides to repay by convenient payroll
deductions.  He must now remit $750 per month ($187.50 per week) to meet the
criteria of 1.5% of $50K, not $20K.  What the heck, he figures, I'll just be
paying it off sooner --- $187.50 per week rather than $300 per month. 

     WRONG-O!  The $187.50 per week goes into an escrow account.  Once a 
month, $300 goes against the loan, and the remaining $450 goes into shares 
(a savings account).  What has he gained (other than 'forced savings')???  

Possible Solution, or what he should have done in the first place, but didn't 
have NOTES:
     Since the money is going to end up in shares anyway, he changes the 
weekly deduction from a loan payment into shares/savings.  Once a week, like
clockwork, he calls EASY-TOUCH and does a #3, paying from shares to loan, for
$187.50.  In this way, the money goes where he wants it to go, all of it, once
a week rather than once a month. 
     
     Have I missed something?
     Gary R.

(By the way, if you think DCU is fun to deal with, ask me some time about my
 former home equity line of credit with Bank of New England.  What a zoo!)

    You can use Easy-touch (as .8 points out) or a DCU ATM (if convenient),
    save your stamps, and not worry about DCU screwing up your payroll
    deduction.

    This is an official response by Mary Madden of the DCU. The portion of
    that response, dated 14-August-1989, that applies to this note topic is
    included below. See note 2.22 for more information. 
    
    Your comments on this response should be posted here or directed to
    to DCU directly at Mary Madden's number (dtn) 223-6735 x207.
        
    Carl Leeber

******************************************************************************
       Response to 25.5
       
       DCU offers payroll deduction for all of our loans.  When a 
       member has payroll deduction, each week 1/4 of the monthly loan 
       payment is deducted from the deposited pay into a loan escrow 
       which earns the same interest rate as our sharedraft account. 
       As the loan payment becomes due, our system automatically 
       transfers the amount of the payment from the loan escrow suffix 
       to the loan. 
       
       Since our Home Equity line of Credit is a revolving line, the 
       monthly payments vary each month.  Therefore, we must set up 
       payroll deduction under the presumption that the whole line 
       could be used.  We recommend that members with lines of credit 
       opt for payment drafting rather than payroll deduction.
       
       Members may take advantage of our automatic loan payment 
       drafting service.  Instead of the loan payment being 
       transferred from the loan escrow, the minumum payment will be 
       automatically transferred on the due date from another 
       suffix/share, such as sharedraft.  It is important that members 
       deduct the payment due from their suffix/share balance every 
       month.
       
       Any member wishing to make loan payments on a weekly basis may 
       do so by either calling our MEMBER SERVICE CENTER at 
       DTN/223-8444 or 508/493-8444, or EASYTOUCH at DTN/223-9943 or 
       800/322-1232.
******************************************************************************

When I wrote 25.5, I was just asking the general noter population for their
experiences/opinions, as a 'sanity check'.  I never realized a real live DCU
person would reply!  I'm actually impressed!

BTW, when I did my survey questionnaire, I did ask them (under beneficial
suggestions) to monitor this file on a regular basis.

My thanks to whomever makes this interface happen.
Gary

    It is good to know the difference between
    "automatic loan payment drafting service" and "payroll deduction"!
    
    

    I wasn't able to find any recent discussion pertaining to Home Equity
    loans at DCU.   I am currently in the market for a moderate home equity
    line of credit (anbout $25K) and in the process of shopping around
    I found that most banks would be able to set this up for me, free
    of charge.   And the rates are all about the same (prime + 1.5%)
    which equates to 7.5% today.
    
    The DCU, however, insists on having the house appraied, which costs
    $250.   The reasoning is that they need to provide services for all
    members (not just local here in MA).   [so if you are a big institution
    you cannot provide local, small-institution like services ?].
    
    I politely explained to the Home Equity department of the DCU that I
    simply cannot justify getting a home equity line with them if they
    were going to charge $250  (I suggested that I could provide tax bills,
    bank appraisel report from a recent mortgage refinance, etc).
    
    /Russ

People's Savings Bank (in the Worcester area) will do a home equity loan
based on your tax appraisal -- but they'll only loan up to something like
70% of the appraised value.  Even at that they are taking risks -- my new
appraisal just came in with a drop in value of about 20%, so if I'd been
able to arrange the HE loan I wanted, People's would have ended up with a 
much worse loan-to-value ration than they would normally accept.

Anyway, I don't see why the DCU won't accept a *recent* appraisal from a
refinance, but I would not fault them for not depending on the tax appraisal.

	Luck,
	Larry