What a Year It Has Been…

In the midst of the "worst economic recession in a century," credit union lending for home purchases and refinances is remarkably brisk.




In the midst of the "worst economic recession in a century," credit union lending for home purchases and refinances is remarkably brisk. Callahan & Associates' First Look program indicates first mortgage originations are up 35.2 percent over June of 2008. In the middle of an economic quagmire we are finding our stride.

It could not come at a more critical time. Lending products like credit cards and consumer vehicle loans are suffering and the sluggish rebound from high unemployment levels makes it increasingly difficult for credit unions to maintain and build adequate levels of capital. Simultaneously, credit unions are attempting to grow and attract new members. Credit union real estate mortgage lending is finally catching on and providing the impetus for growth and capital accumulation. First mortgage loan originations accounted for 38.4 percent of total loan originations in the second quarter, up significantly from 31.2 percent in the second quarter of 2007. Many sources indicate more credit unions, not currently participating in the mortgage lending business, are searching for resources to either enter the mortgage business or increase their lending capacity, with an eye to serving both current and prospective members in their communities.

Many consumers still have some time to take advantage of President Obama's Economic Tax Benefit designed to stimulate first-time homebuyers. However with an impending expiration date of December 31, 2009, time is of the essence.

Focusing on home purchases requires more credit unions to diversify their lending menu to include Government Loan programs, which appeal to first-time homebuyers. This, in turn, creates an opportunity to build a more profitable relationship with members. Well-balanced programs providing competitive rates and outstanding member service, to both borrowers (and realtors in purchase money loans), are richly rewarding. This is not the finish line but the correct path along the way on our long journey.

In time, housing inventory will decrease and values will stabilize. Lending systems will flow, and we will likely see mortgage rates rise at some point and may stem refinance mania.

The performance of credit union loan portfolios relative to delinquency and loss mitigation practices and programs will have an impact on the future. How are you dealing with all of these issues? Are you confident you are on the right track? Achieving increases toward the industry goal of double-digit mortgage loan penetration (now at 5.2%) requires a highly coordinated and executed effort. We have a plan for the next five years.

Here are three questions you should consider as you review your strategic plans:

1. How does your credit union address asset-liability issues and who has the responsibility in your organization to ensure your efforts meet both investment and marketing objectives?

2. With a mortgage market share less than ten percent in your credit union, what is your plan to inform and educate your members on the options you provide for mortgage financing?

3. Strategic partnerships are critical to achieving success in mortgage lending. Your staff, both in terms of loan origination and dealing with member inquiries can be the difference of members doing business with you or the competition. What criteria do you use to manage and evaluate your success in this area?