This is the only new article this week. It focuses on the evolving mortgage market strategy in 2004. All other featured articles this week represent the best articles of 2003. Enjoy!
U.S. mortgage lending activity experienced unprecedented success over the past three years. The low interest rate environment helped fuel the continuous momentum of reaching $2 trillion in originations for the first time in 2001 to a record breaking $3 trillion in 2003.
Credit unions shared success in the mortgage lending environment as well, making 2003 the third consecutive year of record mortgage originations. First mortgage originations of $72.8 billion through the first nine months of 2003 were a 17% increase over the $62.3 billion originated in all of 2002. Moreover, the third quarter was the strongest quarter ever with $29.1 billion in first mortgage loans. Although 2003 was full of achievements, credit unions may have to change their tune for 2004.
Analysts foresee a very different mortgage lending environment for 2004. An improving economy is causing rates to rise off of their 45-year lows since June 2003. This rise means a potentially substantial drop in refinancing activity. Fannie Mae expects a 76% decline in activity and the MBA expects a 79% decrease. This expected change is already evident with the 75% drop in the MBA Refinance Index from its peak in May 2003 to the end of September.
As a result of the changing environment, credit unions are beginning to focus on innovative strategies that adapt to both the changing lending environment and members' changing needs. Although fixed rate mortgages accounted for over 80% of first mortgage lending over the past two years, adjustable rate products are one alternative strategy that credit unions are increasingly pursuing. In November, the ARM market share for first mortgage originations almost doubled the 15% share recorded in the second quarter of 2003 to 28.6%. Furthermore, the MBA expects ARMs to capture a 26% share of first mortgage originations in 2004.
Below is a table of the top 20 credit unions in 1st ARMs granted year-to-date.