According to data from Callahan & Associates’ FirstLook, credit union first mortgage originations hit $96.1 billion; that’s 7.7% higher than year-to-date numbers in September 2012. Mortgage volume continues at a record pace, but the slowdown in refinancings is evident in third quarter call report data. Quarterly mortgage originations at credit unions declined 15.6% between the second and third quarters of 2013. The Mortgage Bankers Association (MBA) estimates mortgage originations in the second half of 2013 will total only 65% of the volume in the first half of 2013 because of the fall off in refinancing.
CREDIT UNION YEAR-TO-DATE MORTGAGE ORIGINATIONS
Data for all FirstLook Credit Unions as of September 30, 2013
Source: Callahan & Associates’ Peer-to-Peer Analytics
Fewer members have sought refinancing options since mortgage rates started trending higher in May. According to Home Mortgage Disclosure Act (HMDA) data, refinancings accounted for 76.3% of all mortgage originations at U.S. credit unions in 2012. That’s higher than the 71% reported in 2012 by the MBA. Refinancing activity over the past few years has helped lift credit unions’ national mortgage market share from 2.0% at the start of 2006 to slightly more than 7% during the second quarter of 2013. The MBA estimated refinancings would fall as a percentage of total mortgage originations, from 66% to 51%, between the second and third quarter of 2013. By the end of 2014, MBA estimates refinancings will comprise only 36% of the mortgage market.
CREDIT UNION MORTGAGE ORIGINATIONS BY PURPOSE
Data as of December 31
Source: Callahan & Associates’ Mortgage Analyzer
Mortgage asset quality at credit unions has been improving with the strengthening economy. Mortgage delinquency is down to 1.27% as of September 30. That’s a 23-basis-point improvement over the past year. Mortgage-related charge-offs at credit unions are also falling. Through the third quarter, credit unions had an annualized net charge-off ratio of 21 basis points for first mortgages, down from 38 basis points a year ago.
Despite the likely continued slow down of refinancings in the fourth quarter, overall, 2013 will be a strong mortgage lending year for credit unions. However, new mortgage regulations from the Consumer Financial Protection Bureau set to take effect in January might affect activity in 2014. To maintain momentum, credit unions will need to focus on purchase mortgages while managing the maze of new regulations. Despite the hurdles, credit unions have a tremendous opportunity to build on their rising market share in the coming years.