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FAMILY FINANCE: Savings are safe in a credit union

Lynn Brenner | Family Finance

October 5, 2008

My husband and I are retired. We have our savings in a federal credit union, and I am not sure if it is as safe as an FDIC account at a bank. The credit union states that it is federally insured, but I'm still not convinced that our savings are safe. Please tell me the difference between the Federal Deposit Insurance Corporation and the National Credit Union Administration, and whether I should transfer to a bank.

J.L. via e-mail

Your money is safe in a federal credit union.

It's covered by the National Credit Union Share Insurance Fund, which, just like FDIC, is backed by the full faith and credit of the U.S. government. Your accounts are insured for the same limits, too.

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As part of the financial rescue package passed by Congress last week, FDIC and NCUSIF will both cover all individual accounts at one bank or credit union for up to $250,000, and all jointly owned accounts at one bank or credit union for up to $250,000 per owner. The previous per-owner limit on individual accounts and on jointly owned accounts was $100,000.

NCUSIF and FDIC also provide separate coverage for retirement accounts. FDIC covers all your retirement accounts at one bank for up to $250,000. NCUSIF covers all your money in traditional IRAs and Roth IRAs at one credit union up to $250,000. Keoghs - tax-deferred retirement plans for the self-employed - have their own $250,000 limit of NCUSIF insurance. (In other words, if you had an IRA and a Keogh account at your credit union, together they'd be insured for up to $500,000.)

Readers who want to make sure all their deposits are fully insured can check online by using calculators provided by the FDIC and the National Credit Union Administration. For the FDIC calculator, go to www.fdic.gov/edie. For NCUSIF, go to webapps .ncua.gov/ins.

About nine years ago we took a mortgage for one third of the value of our house - a first mortgage on a fully paid house. The bank was subsequently sold to Washington Mutual. We've been faithfully making mortgage payments to WaMu since then. How does our mortgage fit into the mix with JPMorgan Chase purchasing the mortgage assets (non-assets?) of WaMu?

M.A. via e-mail

Mortgages like yours are one of the reasons that

JPMorgan Chase bought Washington Mutual.

Think of WaMu as a house whose owners were forced to sell. It has a seriously impaired septic system and the roof has seen better days - but it also has a solid foundation and a good layout and it's in a terrific location. For the right buyer, at the right price, that house can be a smart purchase.

Chase is happy to have you as a customer. From your perspective, nothing will change. You should continue to make out your mortgage checks the same way, and send your payments to the same address.

I have heard that Chase has the right to increase the interest rate on my WaMu mortgage even though I have or had a fixed-rate 30-year mortgage. Is this true?

P.B. via e-mail

No. All the terms of your WaMu mortgage stay the same. The interest rates of WaMu mortgage holders will continue to be exactly as spelled out in the mortgage documents. "If you have a 30-year fixed rate, your rate will remain the same for the rest of that 30-year term," says Thomas A. Kelly, a JPMorgan Chase spokesman.

Chase also has decided to honor the rates on all existing WaMu certificates of deposit through their maturity, Kelly says. As I noted in an earlier column, this doesn't always happen when a healthy bank buys a failing institution. (But in cases where interest rates on existing CDs have been changed, the early withdrawal penalty has been waived, too.)

Send questions to Family Finance, Business Desk, Newsday, 235 Pinelawn Rd., Melville, NY 11747-4250, or e-mail to Bfamfin@aol.com. Include your age, income and a list of major assets. Letters and e-mails can't be answered personally.