How much should credit unions invest in their mortgage lending engine? The answer depends on the market they serve. Activity across the five NCUA regions varies, with credit unions taking advantage of different opportunities in different areas across the country.
To tease out what's happening in what market, start with HMDA* data.
There are ample ways to slice and dice HMDA data to gain a deeper understanding of the market. Callahan & Associates uses MortgageAnalyzer to analyze how the country as well as individual NCUA regions are performing in the mortgage originations.
Click here to read Part 1 on mortgage originations.
Click here to read Part 2 on mortgage type.
Check out what Callahan learned about why U.S. consumers are taking out home loans. Then log into MortgageAnalyzer to learn more about your own mortgage market.
Lenders categorize HMDA origination reporting based on loan type (read more in Part 2 of this series) as well as loan purpose. The latter captures whether loans are for purchase, refinance, or home improvement.
Purchase loans at U.S. credit unions increased 11.3% year-over-year; however, as a percentage of first mortgage originations at credit unions, these loans decreased for the second consecutive year to 43.9% as of year-end 2016.
It is refinancing loans that account for the majority — 49.5% — of credit union mortgages. Despite their popularity at credit unions, though, the industry’s market share for this segment decreased from 6.6% in 2015 to 6.4% in 2016.
Of the three purpose categories, home improvement offered the highest market share for credit unions. Cooperatives funded 10.4% of these loans in 2016.
Credit unions in the NCUA New England Region posted strong growth across all mortgage loan purposes. Purchase, refinance, and home improvement originations increased 15.9%, 20.0%, and 30.2%, respectively. Refinancing loans made up the highest portion of mortgage lending at credit unions in the region — 48.2% with balances of $13.0 billion.
Massachusetts credit unions refinanced nearly $900 million more in 2016 than they did in 2015. Their originations of $2.4 billion represent a year-over-year increase of 30.9%. Michigan credit unions made $3.2 billion in purchase mortgages last year, topping New York for the first time in recent memory. Finally, Vermont cooperatives posted the highest annual growth — 63.8% — in home improvement loans for any state in the region.
Refinances accounted for 57.5% of all mortgage originations for credit unions in the NCUA Western Region. That is a significantly higher percentage than in any other region. Two states, Idaho and Hawaii, posted notable annual refi growth of 43.9% and 40.7%, respectively. Collectively, refinances in the Western Region were up 21.1% in 2016 to $23.8 billion.
Purchases accounted for more than one-third, 35.7%, of the region’s credit union mortgage portfolio. Purchase originations increased 8.0% in 2016 to $14.8 billion. All but two states, Hawaii and Alaska, posted growth in purchase loan originations, but credit unions also turned out a strong performance in home improvement loans. Western credit unions originated $2.8 billion in improvement loans — that’s 19.8% more than in 2015. Alaska credit unions more than doubled their home improvement origination activity from 2015, expanding 121.0% to $64.7 million.