topic Re: Navy Fed’s loose UW cause for concern? in Personal Finance

Navy Fed’s loose UW cause for concern?

lyTENciL — Tue, 19 Jan 2021 02:05:32 GMT

I've adopted Navy as my primary bank since joining about a year ago. I give them my paycheck DD, mid 5 figure savings, CD, SSL. They're the front runner for my planned mortgage apping. I got a 25K CC from them. Like everyone else on this board, I was enthralled by their generosity of credit limits. But I've been paying more attention to the monster SLs they give to people with BKs, mid-600 ficos. I'm starting to be concerned about what this indicates about their level of exposure. I know they are the largest CU, with $100B+ assets. They don't do the risky investment bank stuff that got the big FIs in so much trouble in the last crisis, afaik.

Am I nuts to worry about this? Does loose consumer credit UW present any realistic risk down the line? Why or why not?

Re: Navy Fed’s loose UW cause for concern?

Anonymous — Tue, 19 Jan 2021 02:21:11 GMT

@lyTENciL wrote:
I've adopted Navy as my primary bank since joining about a year ago. I give them my paycheck DD, mid 5 figure savings, CD, SSL. They're the front runner for my planned mortgage apping. I got a 25K CC from them. Like everyone else on this board, I was enthralled by their generosity of credit limits. But I've been paying more attention to the monster SLs they give to people with BKs, mid-600 ficos. I'm starting to be concerned about what this indicates about their level of exposure. I know they are the largest CU, with $100B+ assets. They don't do the risky investment bank stuff that got the big FIs in so much trouble in the last crisis, afaik.

Am I nuts to worry about this? Does loose consumer credit UW present any realistic risk down the line? Why or why not?

I worry about this as well, but I assume Navy has highly paid individuals and some fantastic data trends to support their continued decision to be loose with the SL/CLs - otherwise, they would have cut back a long time ago. They also know they have the ability to cut back both new and existing limits if it becomes a problem.

The fact that they haven't reinforces my belief that whatever data they are looking at supports their approach to credit card limits.

Re: Navy Fed’s loose UW cause for concern?

Rebuild2019 — Tue, 19 Jan 2021 03:11:44 GMT

Maybe I’m nuts but when NFCU cracked the door and let me in I was so happy and felt this forum had helped me so much. I then felt I wanted to crack that door for the next person. Not close it. Hopefully NFCU will continue to help everyone. Every time I read a post for an approval I remember how I felt. I leave the how, who and when to Navy Federal. That’s what they get paid for. GO NAVY

Re: Navy Fed’s loose UW cause for concern?

Anonymous — Tue, 19 Jan 2021 04:01:45 GMT

@lyTENciL wrote:
I've adopted Navy as my primary bank since joining about a year ago. I give them my paycheck DD, mid 5 figure savings, CD, SSL. They're the front runner for my planned mortgage apping. I got a 25K CC from them. Like everyone else on this board, I was enthralled by their generosity of credit limits. But I've been paying more attention to the monster SLs they give to people with BKs, mid-600 ficos. I'm starting to be concerned about what this indicates about their level of exposure. I know they are the largest CU, with $100B+ assets. They don't do the risky investment bank stuff that got the big FIs in so much trouble in the last crisis, afaik.

Am I nuts to worry about this? Does loose consumer credit UW present any realistic risk down the line? Why or why not?

@lyTENciL That is also something I have considered as well. I have personally benefitted from Navy's "loose uw" for those with lower scores. I think they have a few factors in their favor aside from their decades long credit data trends analysis:

- they are a credit union, and are not a publically owned by investors looking to maximize their stocks prices/dividend payouts every quarter.

- limited membership (at any time they can restrict membership even further, if IIRC they used to only extend membership to members of the Navy and their family members).

- internal scoring model (as evidenced by the amount of folks with great scores who are denied or only approved with toy limits, they seem to value their proprietary internal scoring system which also seems to favor internal payment history/membership metrics).

- sensitivity to dti (most credit unions seem to be sensitive to high dti).

- lastly they also have a ban hammer for anyone who burns them in bk, which ensures that at least some of those folks may come back to the fold after making them whole.

They also can perform AA like any other financial institution in case things get really bad (limiting cli or decreasing unused limits or flat out closing accounts like Synch).

I think it's a good sign that they began limiting credit limit increases to $4k during this down turn.

The last thing I will mention although I am super biased is that I will absolutely continue to sing their praises. They have continued to help me tremendously during my rebuild (no bk). I would hate for others who qualify for membership to get cut out and not get the helping hand.

Also, I believe they still have a rule where you can't get approved for an unsecured card within a year or two of bk. Most of those folks had a secured card which graduated.

Plus it seems that financial institutions go through periods where they are more "loose with uw". Capital one used to be fairly loose, until they clamped down recently.

These are jmho (I'm not learned so that's my best guess).

Re: Navy Fed’s loose UW cause for concern?

Anonymous — Tue, 19 Jan 2021 04:24:11 GMT

Personally I feel that their credit card portfolio is only one small portion of their business I don’t know what the percentage is, really, but I know a certain amount of money set aside for potential defaults.

And as stated since they are a credit union and not chasing profit it’s easier for them to absorb the losses and, I think a lot of people with navy do the right thing. I wonder if anyone has looked at their annual report and sought the default rate and compared it to other lenders?

Re: Navy Fed’s loose UW cause for concern?

Shooting-For-800 — Tue, 19 Jan 2021 13:16:01 GMT

They are not that loose; they won’t give me a cli.

Re: Navy Fed’s loose UW cause for concern?

AverageJoesCredit — Tue, 19 Jan 2021 14:04:19 GMT

@lyTENciL wrote:
I've adopted Navy as my primary bank since joining about a year ago. I give them my paycheck DD, mid 5 figure savings, CD, SSL. They're the front runner for my planned mortgage apping. I got a 25K CC from them. Like everyone else on this board, I was enthralled by their generosity of credit limits. But I've been paying more attention to the monster SLs they give to people with BKs, mid-600 ficos. I'm starting to be concerned about what this indicates about their level of exposure. I know they are the largest CU, with $100B+ assets. They don't do the risky investment bank stuff that got the big FIs in so much trouble in the last crisis, afaik.

Am I nuts to worry about this? Does loose consumer credit UW present any realistic risk down the line? Why or why not?

Yes, you are nuts. Let those people default. They will only hurt themselves. I agree though its mindboggling but i wont complain because they put more faith in us that no other would so it makes me triple more wary of not burning them. At the end of day its on us to keep up our part of the agreement. And honestly, for most of our members , we've earned this kind of treatment through selfless service to country.

Re: Navy Fed’s loose UW cause for concern?

AverageJoesCredit — Tue, 19 Jan 2021 14:05:25 GMT

@Anonymous wrote:
@lyTENciL wrote:
I've adopted Navy as my primary bank since joining about a year ago. I give them my paycheck DD, mid 5 figure savings, CD, SSL. They're the front runner for my planned mortgage apping. I got a 25K CC from them. Like everyone else on this board, I was enthralled by their generosity of credit limits. But I've been paying more attention to the monster SLs they give to people with BKs, mid-600 ficos. I'm starting to be concerned about what this indicates about their level of exposure. I know they are the largest CU, with $100B+ assets. They don't do the risky investment bank stuff that got the big FIs in so much trouble in the last crisis, afaik.

Am I nuts to worry about this? Does loose consumer credit UW present any realistic risk down the line? Why or why not?
I worry about this as well, but I assume Navy has highly paid individuals and some fantastic data trends to support their continued decision to be loose with the SL/CLs - otherwise, they would have cut back a long time ago. They also know they have the ability to cut back both new and existing limits if it becomes a problem.

The fact that they haven't reinforces my belief that whatever data they are looking at supports their approach to credit card limits.

Well said. We often think our limits are uncutable. It only has to happen once

Re: Navy Fed’s loose UW cause for concern?

AverageJoesCredit — Tue, 19 Jan 2021 14:07:48 GMT

@Shooting-For-800 wrote:
They are not that loose; they won’t give me a cli.

And i have been denied multiple times 🙃. Even trying to help Dad with a consolidation loan they said no so they do know when the risk isnt worth the reward

Re: Navy Fed’s loose UW cause for concern?

spiritcraft1 — Tue, 19 Jan 2021 14:39:50 GMT

They have been giving out often huge limits to people in the high 500's even for more than a decade. They are more strict now than they were years ago. This is why there were actually people joining the Coast Guard Auxiliary just to get in 10 years ago. Before I joined, I used to see shocking approvals out of them. My $8.2 limit Flagship @ a 590 TU09 two years ago was shocking as well. I think they know what they are doing though.

Edit to add: They are indeed huge but have relatively few branches. Their overhead is much less than a "Bank" especially since there are no pigs at the top with 5 mansions, a private Island, golden parachutes and a fleet of private jets. They are basically a huge digital based lender and I bet they doing quite well. I don't plan on ever finiding out but I hear they play hardball with those who burn them.

Re: Navy Fed’s loose UW cause for concern?

Anonymous — Tue, 19 Jan 2021 18:51:46 GMT

Their credit card losses are actually not that substantial even for the fact that like 20 billion of their 80 billion in loans are for credit cards. I think people are more likely to pay them back than they are a bank because CUs tend to mostly have members who just do business with that one FI so they would be able to seize funds from deposits, repo cars (and I have absolutely heard of them doing so to pay off delinquent cards), etc. They also have been known to reduce interest payments and such for people who can demonstrate a financial need.

I am not worried about them in the least. They seem to be very well run.

Re: Navy Fed’s loose UW cause for concern?

BearsCubsOtters — Tue, 19 Jan 2021 21:09:55 GMT

@lyTENciL wrote:
I've adopted Navy as my primary bank since joining about a year ago. I give them my paycheck DD, mid 5 figure savings, CD, SSL. They're the front runner for my planned mortgage apping. I got a 25K CC from them. Like everyone else on this board, I was enthralled by their generosity of credit limits. But I've been paying more attention to the monster SLs they give to people with BKs, mid-600 ficos. I'm starting to be concerned about what this indicates about their level of exposure. I know they are the largest CU, with $100B+ assets. They don't do the risky investment bank stuff that got the big FIs in so much trouble in the last crisis, afaik.

Am I nuts to worry about this? Does loose consumer credit UW present any realistic risk down the line? Why or why not?

You are not alone in worrying/questioning some of their moves; though mine is more whom they are letting in rather than worrying about losses or whether my funds are safe. They went from being one of the hardest credit unions to join (not even veterans could join! If you did not join while active duty, you were not eligible) to being one of the easiest starting in 2017. They seem to be literally taking people's word for face value when they call to join "ugh, yeah, my grandpa was in WWII, what branch? ugh Army."

I have no idea if people are lying or if NFCU has some government list that they reference, but it seems like everybody is turning a blind eye. If there are people lying, I would bet it is a very small number. Of course, I would also assume most Americans have had a grandfather or father that was in WWII, Korea, Vietnam, the Gulf War etc making most eligible in their current, loose eligibility standards. This is an unpopular opinion, but I would like them to operate more like USAA in that your direct parent has to become a member first and then pass it on to you. It could be too that they need a large influx of new members-even credit unions need to grow to survive.

In terms of people defaulting though, I am not concerned. If someone filed a Chapter 7, they have to wait another 7 years to file again. Additionally, they are regulated similarly to banks, so they have to have risk assessments and they have to have money set aside for losses.

Another thing to consider is that banks and credit unions soft pull us all the time. And they have fancy computer software that mitigates risk; so even if you have a 620 FICO and they gave you $25,000, that does not mean that they will actually let you get anywhere near that $25,000 limit. After $5,000 they may cut you off etc depending on what their software is set up to look for.

I think if I ever got close to having financial issues, I'd make sure my NFCU accounts were paid off/wouldn't have used them in the first place for purchases I could not repay, because I love them so much I wouldn't want to lose them. Let Citi or Capital One take the loss

Re: Navy Fed’s loose UW cause for concern?

AverageJoesCredit — Wed, 20 Jan 2021 01:19:09 GMT

@BearsCubsOtters wrote:
@lyTENciL wrote:
I've adopted Navy as my primary bank since joining about a year ago. I give them my paycheck DD, mid 5 figure savings, CD, SSL. They're the front runner for my planned mortgage apping. I got a 25K CC from them. Like everyone else on this board, I was enthralled by their generosity of credit limits. But I've been paying more attention to the monster SLs they give to people with BKs, mid-600 ficos. I'm starting to be concerned about what this indicates about their level of exposure. I know they are the largest CU, with $100B+ assets. They don't do the risky investment bank stuff that got the big FIs in so much trouble in the last crisis, afaik.

Am I nuts to worry about this? Does loose consumer credit UW present any realistic risk down the line? Why or why not?
You are not alone in worrying/questioning some of their moves; though mine is more whom they are letting in rather than worrying about losses or whether my funds are safe. They went from being one of the hardest credit unions to join (not even veterans could join! If you did not join while active duty, you were not eligible) to being one of the easiest starting in 2017. They seem to be literally taking people's word for face value when they call to join "ugh, yeah, my grandpa was in WWII, what branch? ugh Army."
I have no idea if people are lying or if NFCU has some government list that they reference, but it seems like everybody is turning a blind eye. If there are people lying, I would bet it is a very small number. Of course, I would also assume most Americans have had a grandfather or father that was in WWII, Korea, Vietnam, the Gulf War etc making most eligible in their current, loose eligibility standards. This is an unpopular opinion, but I would like them to operate more like USAA in that your direct parent has to become a member first and then pass it on to you. It could be too that they need a large influx of new members-even credit unions need to grow to survive.

In terms of people defaulting though, I am not concerned. If someone filed a Chapter 7, they have to wait another 7 years to file again. Additionally, they are regulated similarly to banks, so they have to have risk assessments and they have to have money set aside for losses.

Another thing to consider is that banks and credit unions soft pull us all the time. And they have fancy computer software that mitigates risk; so even if you have a 620 FICO and they gave you $25,000, that does not mean that they will actually let you get anywhere near that $25,000 limit. After $5,000 they may cut you off etc depending on what their software is set up to look for.

I think if I ever got close to having financial issues, I'd make sure my NFCU accounts were paid off/wouldn't have used them in the first place for purchases I could not repay, because I love them so much I wouldn't want to lose them. Let Citi or Capital One take the loss

My sentiment only sub Cap One for Penfed

Re: Navy Fed’s loose UW cause for concern?

lyTENciL — Wed, 20 Jan 2021 06:19:15 GMT

Great replies, folks, thank you. I've read up a bit, and I can understand their strategy better. They decided to go after an untapped market of subprime borrowers, like a lot of big institutions have. They stand out because credit unions are typically more conservative lenders than big banks. It must be sufficiently lucrative for them to keep it up. Great point about them being able to cut off credit well before people use up those monster lines. They did just recently get dinged by the feds for overly aggressive collections, so apparently they haven't let borrowers walk all over them.

I firmly believe in second chances. People make dumb, irresponsible choices (edit: and external factors like job loss and medical bills might predomominate as cause for bankruptcy) and should be allowed to make a turnaround. That's not the part that concerned me. It's the huge limits handed out like candy, without the ramp up one might expect for people to demonstrate they have learned from their past. I'll guess I'll be forever spooked by what went down in 2008, when so many big institutions were taken down - or nearly so - because their lucrative risky bets suddenly stopped working out.

Re: Navy Fed’s loose UW cause for concern?

Anonymous — Wed, 20 Jan 2021 04:02:39 GMT

I have read a few comments about membership and wanted to mention to the people who are unaware that there was a legitimate loophole that existed where you could pay your $25 membership fee to NLUS-San Diego to become a member. You were then eligible to apply for membership at NFCU. This was discontinued in 2017. There are current and former members of this forum who are grandfathered in to NFCU without any military affiliation whatsoever.

Re: Navy Fed’s loose UW cause for concern?

Bankrupt2019 — Wed, 20 Jan 2021 04:32:19 GMT

Just my $.02 I think one of the things they bank on is that if smart borrowers have to pay interest, they're going to want to pay less. Which means a lot of balance carrying customers will choose their cards over say a Capital One card.

Re: Navy Fed’s loose UW cause for concern?

toddc — Thu, 21 Jan 2021 18:20:28 GMT

@BearsCubsOtters wrote:
@lyTENciL wrote:
I've adopted Navy as my primary bank since joining about a year ago. I give them my paycheck DD, mid 5 figure savings, CD, SSL. They're the front runner for my planned mortgage apping. I got a 25K CC from them. Like everyone else on this board, I was enthralled by their generosity of credit limits. But I've been paying more attention to the monster SLs they give to people with BKs, mid-600 ficos. I'm starting to be concerned about what this indicates about their level of exposure. I know they are the largest CU, with $100B+ assets. They don't do the risky investment bank stuff that got the big FIs in so much trouble in the last crisis, afaik.

Am I nuts to worry about this? Does loose consumer credit UW present any realistic risk down the line? Why or why not?
You are not alone in worrying/questioning some of their moves; though mine is more whom they are letting in rather than worrying about losses or whether my funds are safe. They went from being one of the hardest credit unions to join (not even veterans could join! If you did not join while active duty, you were not eligible) to being one of the easiest starting in 2017. They seem to be literally taking people's word for face value when they call to join "ugh, yeah, my grandpa was in WWII, what branch? ugh Army."
I have no idea if people are lying or if NFCU has some government list that they reference, but it seems like everybody is turning a blind eye. If there are people lying, I would bet it is a very small number. Of course, I would also assume most Americans have had a grandfather or father that was in WWII, Korea, Vietnam, the Gulf War etc making most eligible in their current, loose eligibility standards. This is an unpopular opinion, but I would like them to operate more like USAA in that your direct parent has to become a member first and then pass it on to you. It could be too that they need a large influx of new members-even credit unions need to grow to survive.

You're 100% on this.... I called them opened an account said my grandfather was in WWII (he actually was) and my father was in the army (he actually was also) and they said you're all set... So I don't know if they actually had access to or were able to verify that in anyway or they just took my word... I didn't have to provide them anything additionally, maybe my grandfather had a Navy Federal or other veteran credit union account or they just took my word. Definitely interesting because I've seen other people on here state they needed to provide them proof/dd214s.

Re: Navy Fed’s loose UW cause for concern?

Credit4Growth — Fri, 22 Jan 2021 18:02:07 GMT

@spiritcraft1 wrote:
They have been giving out often huge limits to people in the high 500's even for more than a decade. They are more strict now than they were years ago. This is why there were actually people joining the Coast Guard Auxiliary just to get in 10 years ago. Before I joined, I used to see shocking approvals out of them. My $8.2 limit Flagship @ a 590 TU09 two years ago was shocking as well. I think they know what they are doing though.

Edit to add: They are indeed huge but have relatively few branches. Their overhead is much less than a "Bank" especially since there are no pigs at the top with 5 mansions, a private Island, golden parachutes and a fleet of private jets. They are basically a huge digital based lender and I bet they doing quite well. I don't plan on ever finiding out but I hear they play hardball with those who burn them.

I agree with each point, ...or at least sentiments made in each sentence that you posted here. I want to assure at least that much.I'm a point is that they were founded at least in 1933, maybe before for the conception, so they have a grand idea of what they are doing and how they are doing/operating their business! I believe that they take their own history and the history of their customers into consideration when making any and every decision.