Credit unions originated $60.3 billion in first mortgage loans for their members during 2007, up 10.8 percent versus 2006. The jump in activity comes in a year in which the Mortgage Bankers Association reported a 14.5 percent decline in mortgage originations nationally. As a result, credit unions captured their highest share of the first mortgage market in history at 2.6 percent.
Credit union mortgage market share rose in each quarter of 2007, increasing from 1.9 percent in the first quarter to 3.4 percent in the fourth quarter. A recent article in The Wall Street Journal , "Credit Unions Offer Lifeline On Mortgages", highlighted the ability and willingness of credit unions to work with consumers at a time when other lenders have abandoned all but the most credit worthy individuals.
Outstanding real estate loans at credit unions rose 11.0 percent during the year. The first mortgage portfolio increased 12.2 percent to $184.3 billion while other real estate loans grew 8.7 percent to reach $93.6 billion. Firsts and other real estate loans represent 34.2 percent and 17.4 percent, respectively, of the total credit union loan portfolio at year-end.
Balance Sheet Strength Drives Success
Two factors are driving credit union mortgage success. The first is an ability to fund loans from their own balance sheets. Over 225 mortgage lenders have either collapsed or seriously curtailed their lending operations since late 2006 according to www.ml-implode.com, a website that tracks the market. Many of these institutions relied on the secondary market for funding and simply could not fund their commitments once this market contracted. The nation's largest mortgage lender, Countrywide, is being acquired by Bank of America due in large part to an inability to continue funding loans after drawing on credit lines and the Federal Home Loan Banks. Meanwhile, credit unions and thrifts both posted double-digit increases in originations due to their ability to lend from their balance sheets.
Credit unions sold $16.2 billion in first mortgages on the secondary market in 2007, just under 27 percent of total originations during the year. The industry's secondary market sales activity was steady throughout the year despite the volatility in the markets. Ample liquidity remains in credit unions as 2008 begins. The loan to share ratio reached 83.3 percent at year-end, up slightly from the 82.2 percent posted a year ago.
The second factor in the industry's mortgage success is the overall quality of the portfolio. Real estate loans two or more months delinquent at credit unions reached 0.67 percent of the total real estate portfolio at year-end. Although this is up 34 basis points from the delinquency rate recorded at year-end 2006, credit union delinquency remains well below that reported by competitors. Thrifts reported that 1-4 family loans three or more months delinquent rose 148 basis points during the year to reach 2.24 percent. Countrywide reported similar three month delinquency numbers on conventional first mortgages, with a rate of 2.28 percent at year-end 2007 versus 0.71 percent at year-end 2006.
Well Positioned for 2008
As other lenders retreat from the market, many credit unions view the current credit crunch as an opportunity to emphasize their role as mortgage lenders to the community. Many credit unions are reporting overflow crowds at home buying seminars they are hosting. Some are reaching out to offer refinancing to members with adjustable rate mortgages that are due to reset in the next year. Credit unions in Florida and California , states hit hardest by the housing downturn, are working with members on alternative payment plans to ensure that they do not lose their house.
Few, if any, economic forecasts at the beginning of 2007 predicted the breadth and depth of the fallout from the subprime mortgage crisis. While not immune to the effects of the economic slowdown, as 2008 begins credit unions are in a strong position to continue to expand their lending relationships with both new and existing members.