Consumers and businesses are feeling the economic squeeze as summer approaches. Gas prices are topping $4 a gallon in parts of the country and food prices are up five percent over the past year. Layoffs and employee buyouts are occurring from Wall Street to the Rust Belt.
In the midst of this turmoil, credit unions are focusing on responding to the needs of their members and the communities they serve. Credit unions posted $60.9 billion in loan originations in the first three months of 2008, the highest volume ever for the first quarter. Lending activity was led by an incredible 53 percent jump in first mortgage originations versus first quarter 2007. Share balances are growing at the fastest rate in four years as dividend payouts continue to rise despite a falling interest rate environment. Credit union membership now tops 88.9 million.
Credit unions have momentum today because consumers are realizing the value of the cooperative model. It was difficult to distinguish financial services providers in the first half of the decade as credit terms were loosened and interest rates hovered at historical lows. Over the past two years the credit union advantage has become clear. Beyond better rates and lower fees, the real advantage comes from the "ownership moment" that is realized by members as credit unions take actions that are in their interest.
First mortgage originations in credit unions rose 53 percent versus the first quarter of 2007 to $18.5 billion. The increase occurs in a national market that declined 6.6 percent over the same period according to the Mortgage Bankers Association (MBA). As a result, credit unions' share of the first mortgage market has risen from 1.9 percent to 3.3 percent over the past 12 months. Credit unions continue to make real estate loans while 60 percent of senior bank lending officers report tightening credit standards on prime mortgages in the Federal Reserve's most recent survey. Evidence of this pullback is seen in the 21 percent decline in Thrift mortgage originations from first quarter 2007 to first quarter 2008.
Change in Mortgage Originations From 1Q 2007 to 1Q 2008
Data as of March 31, 2008
Source: Callahan's Peer-to-Peer, Mortgage Bankers Associates, Office of Thrift Supervision
Credit unions have a window in this environment in which they can strengthen their role as mortgage lenders, and opportunities exist for them to continue their momentum. Brokers and lenders have exited the market, leaving credit unions as the leading local option for many consumers. Over $200 billion in ARMs are due to reset through the end of 2008. Real estate agents are looking for new sources of financing referrals as existing sources pull back.
Beyond these market dynamics are the opportunities credit unions have to assist individuals challenged by the current environment. One large Florida credit union has rewritten over $10 million in member loans to help keep individuals in their homes. Such initiatives are examples of credit unions "doing the right thing" and are defining the credit union difference in today's market.