Fed-up Bank Patrons Flee to Credit Unions...

The movement to transfer money from big banks to smaller, local banks and credit unions has gained some serious momentum over the past few years.

From websites like moveyourmoneyproject.org to bloggers handing out flyers in front of branch (and corporate) offices of the “too big to fail” banks, the word is out on the benefits of banking smaller and local.

Earlier this week, The Detroit News profiled several metro-Detroiters who made the move themselves.

I’m a firm supporter of the movement and have closed several accounts with some of the larger banks myself, but be warned – smaller might not be the way to go for all your lender/banking needs.

Those looking for a mortgage should inquire about more than just the current rate, when dealing with the smaller local banks and credit unions – most of whom have had limited exposure to the mortgage market.

Without feeling the pain many of the larger banks have felt, it’s been our experience that smaller banks and credit unions have been far less willing to negotiate when it comes to short selling your home.

In many instances – with credit unions particularly – full repayment was expected in return for short sale approval. With the larger banks and lenders on the other hand, it’s fairly common to negotiate the deficiency down to 20-25% of what’s owed.

In part, it’s just the cost of doing business for the larger banks. With heavy exposure to the mortgage crisis, they’ve been forced to negotiate better deals – simply because the cost to accept a short sale and cut their losses is far less than foreclosing and pursing. Especially, if the person they’re pursuing is insolvent – which is often the case.

The number of situations where a smaller bank or credit union decides to play hardball, only to take a loss when the borrower can’t be pursued, is dwarfed by what the larger banks would face if they took the same stance/risk.

Smaller banks and credit unions are fantastic for checking accounts, savings accounts – most personal banking. They might be the right place for your mortgage as well, but do the research before committing…