The 2008 Mortgage Opportunity

With ARMs resetting and interest rates falling, credit unions can take advantage of the competition pulling back and increase the public perception of credit unions as a primary mortgage lender.


Subprime mortgage issues continue to plague the nation's largest banks and most prominent mortgage lenders. Because of credit issues and liquidity challenges, 40% of domestic banks are tightening mortgage lending standards according to the Federal Reserve. As banks pull back from lending, credit unions have a tremendous opportunity to present themselves as primary mortgage lenders to those individuals who are now in need of assistance.

The real estate loan portfolio remains strong for credit unions, growing 10.0 percent over the past year to $270.8 billion. Growth rates for both the total loan portfolio and real estate loan portfolio picked up during the third quarter. By comparison, tighter lending standards are evident in banks with one-to-four family residential mortgages growing at only a 2.9 percent annual rate.

Increasing Market Share

Credit unions remain active mortgage lenders as competitors pull back. First mortgage volume of $44.8 billion through September exceeds the $41.3 billion originated during the first three quarters of 2006 by 8.5 percent. This increase comes during a period in which the Mortgage Bankers Association (MBA) forecasts a 7.7 percent decline in originations nationally. As a result, credit unions' share of the mortgage market through the first nine months of the year has risen to 2.4 percent from 1.9 percent in 2006. This is the highest share ever captured by credit unions.

The disparity between credit union activity and market trends is evident in third quarter results as well. The $15.9 billion in credit union first mortgage originations during the third quarter is just below the $16.8 billion originated in the second quarter. Although this represents a decline of five percent, the MBA projects a nearly 20 percent drop in first mortgage volume nationally during the quarter. The numbers translate to credit unions capturing 2.9 percent of originations during the quarter.

The Refi Opportunity

A significant opportunity exists in refinancings as a record amount of ARMs are about to reset and interest rates fall. As surveyed by Bloomberg News from December 3 rd to December 10 th , the benchmark ten-year note yield is forecast to remain below 4.5% for the next year. These forecasts continue to be revised down each week. With low rates, members will look to refinance out of existing ARM products and higher-rate fixed products.

Credit unions can take advantage of this refi opportunity in several ways:

  • Offer community seminars for individuals looking for mortgage counseling.
  • Market to members who have an ARM with either your credit union or another institution that could benefit from refinancing.
  • Partner with local realtor organizations and mortgage brokers.

Credit unions need to be proactive in today's market by spreading the word among local communities and SEGs that they are primary mortgage lenders who offer products that promote members' well-being rather than the institution's bottom line.

Join us for Refinancing: The Key to 2008 Mortgage Success, a webinar brought to you by Callahan & Associates to learn about current member mortgage preferences with actionable results and how two credit unions are taking advantage of today's market.




Dec. 17, 2007



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