TUSCALOOSA, Ala. — Alabama ONE Credit Union said it has partnered with financial technology company Takara to launch a mortgage program designed to help homeowners overcome the so-called “mortgage lock-in” effect, completing what the companies said is the first transaction under the program in Alabama.
According to Takara, the credit union recently closed the state’s first loan through DREAM, or Discount for Real Estate Affordability and Mobility, a program that provides qualified homeowners with a discount on their mortgage payoff balance to help facilitate the purchase of another home.
As the CU Daily reported here earlier, the first DREAM mortgage transaction in the U.S. was completed by Great Lakes Credit Union in Chicago earlier this year.
$94K Reduction
The inaugural transaction in Alabama involved homeowners Alex and Stormy Cameron, who received an approximately $95,400 reduction in the principal balance of their existing mortgage. According to Takara, the savings allowed the couple to increase the down payment on a larger home and cover closing costs.
“It helped us put more down and made the next home more affordable. It really repositioned us financially,” Alex Cameron said in a statement released by Takara. “It helps with the down payment, especially in the higher interest rate climate that we’re in.”
Cameron said the principal reduction significantly improved the couple’s financial position.
“To take a $95,000 reduction in your mortgage, it repositions people 100%,” he said. “It’s an equity play that helps them reposition in a better stance, whether it be more liquid in their account or a better positioning when they actually structure their mortgage. It’s a win.”
Objective of Program
According to Takara, the DREAM program is intended to address the challenges created by higher mortgage interest rates, which have left many homeowners reluctant to sell homes financed with historically low-rate mortgages. The companies said the program is designed to improve homeowner mobility while also benefiting financial institutions.
Alabama ONE said the program generated multiple benefits for the credit union while providing value to members.
“We approached this opportunity the same way we approach every lending decision: by focusing on our specific members’ needs while still balancing risk and return,” Jason Halperin, Alabama ONE’s chief retail officer, said in a statement. “In this case, everyone involved benefited from the transaction. We were able to generate positive fee income, strengthen our balance sheet by reducing credit risk and provide a solution that greatly benefits our membership.”
Potential Benefits
According to Takara, the program offers several potential benefits for participating homeowners and financial institutions, including:
- Discounts that can exceed 10% of a mortgage payoff balance.
- Increased down payment funds and assistance with closing costs for qualified borrowers.
- Greater housing mobility for homeowners seeking to move because of work, family or other life changes.
- Increased loan volume, improved portfolio liquidity and enhanced yields for participating lenders.
- Implementation using existing lending infrastructure without requiring new technology integrations.
Praise for Program
Takara CEO Jonathan Arad praised Alabama ONE for adopting the program.
“We have told the Takara and DREAM story hundreds and hundreds of times, and I want to credit Alabama ONE for being among the very few to recognize the impact this has on members and their families,” Arad said. “This is what modern capital solutions look like.”
Alabama ONE Credit Union, headquartered in Tuscaloosa, has more than $1.3 billion in assets and serves more than 100,000 members across Alabama, according to the credit union.
