The subprime market has been discussed ad nauseum for the past several months. With recent mortgage data pointing to a rebounding market according to mortgage application information provided by MBA, the worst may be over.
However, the stories still persist. Congress has launched new inquiries into predatory lending. Some in the lending industry are fearful of over-regulation because it will not allow the markets to correct themselves.
Foreclosing in 2007
In 2007, more than two million people with subprime mortgages will face foreclosure according to the Center for Responsible Lending.
Also alarming, two in every 1,000 homeowners faced foreclosure in the first three months of 2007 according to a Foreclosures.com report. This accounts for a 0.20% foreclosure rate. How do credit unions compare to this national trend? Historically known as more conservative originators, will this be reflected in their delinquency and foreclosure rates?
Credit Union Performance in 2006
Nationally, credit unions had a 12-month delinquency rate for all first mortgages of 0.03% as of December 2006. This compares to a 90-day delinquency rate for banks of 0.36% according to the FDIC as of December 2006. The FDIC and NCUA do not report the same delinquency timetables. The NCUA also does not report directly on foreclosures, so the best proxy would be the 12-month delinquency rate.
Recently, the American Banker ranked the top 50 metropolitan areas with the highest foreclosures in 2006. The three areas analyzed were chosen to represent various geographic regions and because they contained diverse fields of membership. How did the credit unions in these cities perform versus the overall market?
The Three Metropolitan Areas’ Performance
San Antonio was ranked tenth in foreclosures to total households with one out of every 37 homes being foreclosed, or 2.70%. Compared to that, the 30 credit unions in Bexar county (which contains San Antonio) had a 12-month delinquency rate of 0.02%.
The Tampa-St. Petersburg area was a hot bed of the real estate boom that has occurred in Florida. In 2006, 1.6% of all homes in the area were foreclosed. When analyzing the 28 credit unions in the Hillsborough and Pinellas counties, we again see credit unions performing strongly here. First mortgage delinquencies over 12-months stood at 0.01% as of December 2006, strongly outperforming the market.
The state of Ohio, including Columbus, has fallen on tough economic times recently. With unemployment at 5.6%, Ohio ranks as one of the highest in unemployment rates in the nation. Because of these economic hardships, one in every 45 houses is foreclosed upon in Columbus, or a rate of 2.2%. In Franklin and Fairfield counties, the 28 credit unions had a 12-month first mortgage delinquency rate of 0.12%.
Credit unions continue to outperform banks and mortgage brokers in credit quality when it comes to real estate lending. Credit unions do not look to simply profit from members. They will look to find the best possible product to fit the members’ needs and financial situation. Even in the areas hit hardest by the downward slide of the housing market, credit unions continue to be the financial institution that will do the most to help their members work through any financial difficulties.