Achieving a Breakthrough in the Mortgage Market

While over 3,700 credit unions are active mortgage lenders, the key to capturing a larger share of the mortgage market will be the nearly 5,000 credit unions that currently report no mortgage lending activity.


Credit unions captured 2.2% of the $2.5 trillion first mortgage market in 2006 based on annualized call report data for the first nine months of the year. This share of origination volume is up slightly from the 2.0% recorded in 2005 but remains in the 2.0% to 2.5% range that credit unions have captured annually over the past ten years.

To increase their share of the market by 1%, credit unions need to originate an additional $25 billion in mortgage loans annually, or just over $2 billion per month. While this translates to a 46% increase from 2006 volumes, it would be in line with the $80.1 billion originated across the industry during the refinance boom in 2003. In other words, the industry has demonstrated it has the capacity for this level of activity.

Four Tiers of Mortgage Lending Activity
The chart below shows the distribution of first mortgage lending activity across the industry. At the top tier are the 400 credit unions with the most complete mortgage lending operations. That is, these credit unions originate, sell, and service mortgage loans. The next level is the over 600 credit unions that originate and sell mortgages but do not have a servicing portfolio. The third level represents the approximately 2,700 credit unions that originate mortgage loans but choose to retain them on their balance sheet rather than sell them into the secondary market.

While the good news is that over 3,700 credit unions are active mortgage lenders, the down side is that nearly 5,000, or 58% of all credit unions, report no first mortgage originations. In addition, credit union mortgage lending is concentrated among the largest players, as the top 300 mortgage lenders account for 71% of the industry’s volume. This compares with the top 300 credit unions by assets accounting for 54% of total industry assets.

Although some mortgage lending volume that is originated through CUSOs is not captured in the call report, the dynamics of the industry are evident in these numbers. To achieve a breakthrough in the mortgage market, the industry cannot rely solely on those credit unions that are already active in mortgage lending to generate the additional volume. There will need to be a different approach that impacts activity across the entire credit union community.

Enabling the Fourth Tier
Credit unions’ willingness to collaborate in mortgage lending will be essential to their ability to increase their market share. While many smaller credit unions would find it impossible to develop mortgage lending capabilities on their own, collaboration provides them with the ability to offer their members a complete range of mortgage products. Such collaboration is already occurring in many CUSOs, where investments in mortgage lending capabilities are being shared across multiple credit unions, allowing credit unions as small as $1 million in assets to serve members’ housing needs.

By leveraging investments in mortgage lending capabilities across the credit union community, more credit unions can have an impact on both their members’ lives and the industry’s market share. The key to moving credit union market share above 2.5% is ensuring the 58% that are currently not providing mortgage loans to their members have the ability.




Jan. 29, 2007


  • They key to gain market share is to understand the role of the secondary market in creating an innovative and sustainable mortgage operation. Portfolio lending is what makes Credit Unions Great however; it may also be the practice limiting Credit Union market growth when it comes to mortgage lending. Credit Unions can partner with the Secondary Market in a way beneficial to the Credit Union and the member. Smaller Credit Unions nervous about entering the mortgage market can balance interest rate and credit risk with great member service through these partnerships. Finding this kind of balance will be the key to continue serving the member while achieving growth. My Fathers Credit Union did not offer mortgages and up until a couple of years ago, neither did mine. When my children look for a home down the road I hope that without exception our Credit Union is the leader in the community when it comes to putting people first, by putting them in their first home. Across the country, this can only be achieved when the largest to the smallest Credit Unions are doing the same. Thank you Jay Johnson for an insightful article.
    David H. Kudrin
  • Collaboration is the key!!!!!! Almost two-thirds of our industry is missing out on the mortgage lending industry. But if more smaller credit unions could get together to pursue group solutions under the CUSO banner, that 1% growth figure might not seem so daunting.