CHICAGO—Great Lakes Credit Union, its partner Mortgage Forward and fintech firm Takara have completed what the company said is the first-ever DREAM mortgage transaction in the United States.
The closing, which took place April 11, involved Chicago homeowners Frank and Daniella McGovern, who received a principal balance reduction of more than $41,000 on their existing mortgage, according to Takara. The reduction was delivered via a check at closing and was designed to help the borrowers move out of a low-rate mortgage and purchase another property.
The transaction follows the January launch of the DREAM—Discount for Real Estate Affordability and Mobility—program by Great Lakes Credit Union and Takara, which the CU Daily first reported here. The program is aimed at addressing the so-called “mortgage lock-in effect,” which Takara said has left millions of homeowners reluctant to move because of historically low interest rates on existing loans.
Discount Offered
Under the program, borrowers receive a discount when paying off their mortgage balance, which Takara said can help restore housing mobility while allowing lenders to redeploy capital into new loans.
“It was in the low locked-in percentage rate, so moving up to a higher percentage rate obviously was painful,” Frank McGovern said, according to Takara. “The reduction in principal balance obviously helped that decision-making a lot.”
McGovern added that the program provided flexibility to continue investing in real estate. “The old rate was an anchor. DREAM let me pull it up,” he said.
Broader Adoption Possible
Michael Abraham, chief strategy officer at Great Lakes Credit Union and CEO of Mortgage Forward, said the transaction could signal broader adoption across the credit union industry.
“Nobody wants to be first,” Abraham said, according to Takara. “But once word gets out, every credit union in the country is going to be fielding the same question from their members.”
Takara CEO Jonathan Arad, who published an op-ed on the CU Daily here, described the closing as a “proof of concept” for the program, adding that it gives borrowers more flexibility while offering financial institutions a tool to grow their portfolios.
Takara said the program can be implemented using existing systems and may offer discounts of 10% or more of a borrower’s remaining mortgage balance.
