With mortgage originations down 30 percent nationally due to interest rate increases,
credit unions are challenged with reaching new markets to sustain growth. One strategy
a number of credit unions are taking is to develop mortgage lending programs targeted
to underserved markets such as immigrants and subprime borrowers.
The numbers reveal the opportunities in these markets. Immigrants in the U.S.
now number 30 million. It is expected that minorities will contribute to at least two-thirds
of household growth in the coming years. Subprime loans growing have grown to
28 percent of refinanced mortgages in recent years.
While these figures provide insight into the market opportunities, the current
home ownership rate among low- to moderate-income families is at 56 percent,
below the 68 percent national average. This is the lowest level since 1978.
To convert these opportunities into reality, credit unions are initiating both
individual and collective efforts. The Washington League established a foundation
to reach individuals who have fallen outside mainstream financial services institutions.
They work to educate these individuals on the homebuying process and help them
access credit union services.
Affinity Plus FCU has piloted a program that directs members with impaired
credit to a partner company that locates a mortgage for them at a fair rate.
The company then provides education on how to build good credit. Once good credit
is established, the member is able to refinance with Affinity Plus.
With more than 25 million potential members added to credit union fields of
membership in underserved areas in 2003, the ability for credit unions to deliver
affordable home ownership to consumers is great (see graph below). Developing
new tactics to reach these markets will be the key to success.