What Issues are Affecting Your Mortgage Program Today?

With the market environment changing almost daily, what key issues should credit unions concern themselves with? Share your thoughts on today’s key issues.


Credit unions have reached an all-time high in first mortgage market share due to the market pullback by other institutions. The market continues to evolve on a daily basis as economic news and other events push market volatility.

Before we analyze the impact of several recent events, how has your mortgage lending program been performing thus far in 2008? Have you seen increased activity similar to what many credit unions are? We encourage you to leave your comments and experiences below as sharing information and cooperation are key to the credit unions movement.

Interest Rate Behavior

Traditionally, mortgage rates have generally followed the benchmark ten-year Treasury, which trended based on economic or financial market performance. This spread has historically been around 150 basis points when looking at the 30-year conventional mortgage (Federal Reserve). In the past several weeks, that spread has ballooned to 250 basis points. This increase was driven by continued credit quality concerns of the mortgage-backed securities produced by Fannie and Freddie, but time will tell what effect the recent Fed action to acquire these securities will have.

GSEs Not Helping

In a Washington Post article on March 13 th , Freddie Mac's CEO stated that the GSE is going to focus on returning value to their shareholders over increasing capital levels so they can increase their mortgage capacity. In the battle between shareholders and their chartered public purpose to make housing more affordable, the shareholders are winning. Despite having regulations lifted on their overall capacity and having the conforming loan limits increased, it appears these initiatives will not have a significant effect in the near term.

Opportunities Build

There are about to be two significant pullbacks from the mortgage market. Topping headlines recently was Thornburg Mortgage, a major jumbo mortgage player. Thornburg is attempting to remain viable as banks attempt to collect on hundreds of millions in assets it could default on. Another player, CitiMortgage, plans to decrease the amount of new loans it holds in its portfolio by 50 percent and decrease mortgage assets by $45 billion over the year.

Because credit unions put their focus on their members rather than shareholders, rely on shares to fund loans and not financial markets

Because credit unions put their focus on their members rather than shareholders, rely on shares to fund loans and not financial markets, and have non-GSE alternatives to sell to, they have much more flexibility in today's market than other lenders. Being reactive to interest rate changes and other market shifts is key to increasing credit unions' presence in the market.

To hear how credit unions are pushing ahead and achieving strong results in uneasy times, join us for Think Fast: Navigating a Rapidly Changing Mortgage Environment , a webinar brought to you by Callahan & Associates.




March 17, 2008



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