The ‘credit crunch’ became a ‘credit crisis’ in the third quarter. What began with an overheated housing market has now spread well beyond mortgage lending. The U.S. Government stepped up its intervention in the institutional markets as it became clear that credit had frozen across the banking system. Frozen institutional markets have had a trickle down effect on consumers, who have found it increasingly difficult to obtain both mortgage and consumer loans. Government actions have yet to effectively address the consumer segment though, and many institutions continue to focus on shoring up their balance sheet rather than providing credit to the consumers that drive two-thirds of the U.S. economy.
Credit union members, however, are having a different experience. Preliminary third quarter data through Callahan’s First Look program indicates that credit union lending continues at a record pace in 2008, driven by first mortgage lending activity that is up 24 percent year-to-date versus the first nine months of 2007. Solid balance sheets and a long-term view of member relationships are allowing credit unions to continue to support the communities they serve.
Projecting First Look results puts credit union first mortgage lending activity at over $55 billion through the first three quarters of the year and over $70 billion for all of 2008. The latter amount represents one-tenth of the bailout package and yet demonstrates a direct impact in communities that the Government’s actions have not achieved. First Look credit unions total over $114 billion in assets, or approximately 14 percent of the credit union industry.
The preliminary data shows that credit unions remain active in first mortgage lending and continue to access the secondary market to maintain liquidity for additional lending. Despite tighter restrictions at Fannie Mae and Freddie Mac, secondary sales of first mortgage loans are up 37 percent through the first three quarters among First Look participants. Credit unions continue to make quality mortgage loans, as evidenced by a delinquency rate that is one-fourth that of FDIC-insured institutions.
The difference in credit unions’ approach is seen in the ongoing efforts to reach out to consumers who have questions about how to manage through the crisis. Credit unions are holding seminars at branches, SEG locations and community events. Credit union staff is appearing on local radio and television shows, responding to consumers’ questions and helping them find solutions. A group of Dayton credit unions even held a telethon in partnership with a local affordable housing organization to help residents as the economy slows and concerns about the ability to make mortgage payments rise.
Credit union lending results reflect these efforts and demonstrate that they are maintaining their focus on the most important segment of the market - consumers.