While full service banks and other traditional mortgage lenders have watched their mortgage businesses decline in recent years, credit unions have doubled their market share since 2009 and originated 8 percent of all mortgages in the second half of 2012.
Through the first half of the year, credit unions originated $56.3 billion in first mortgages and captured 7.6 percent of the market. They held 7.8 percent of those mortgages on their books and sold slightly more than half to secondary markets for asset-liability management purposes. Fixed-rate first mortgages comprised 14.6 percent of the asset base for credit unions, a slight increase from the 14.4 percent posted in the first quarter but down from the 14.7 percent posted during second quarter 2011, according to creditunions.com.
Credit unions also posted a 17 percent increase in consumer loan originations over 2011 levels, disbursing $85.5 billion in non-mortgage, non-business loans to members. The industry posted strong growth in used auto, new auto, and credit card loans, with new auto loans increasing 0.7 percent from June 2011 levels.
Industry sources cite service, speed and lower closing costs as advantages credit unions enjoy over other lenders. Closings are generally 30 days faster and credit unions are exempt from state intangible taxes, which can save a borrower several hundred dollars at closing, though a New York Court of Appeals ruled recently that mortgages issued by federal credit unions are subject to the state’s mortgage recording tax. Also, credit unions retain a larger percentage of the mortgages they originate, which means that members will only have one financial institution to make their mortgage payment and not have to worry about making a payment to another bank if the loan were sold.
From the mid-1990s until the mid-2000s, credit unions were a tiny fraction of the mortgage business, accounting for just 2 percent of the first-mortgage market, according to the Credit Union National Association, a trade group. But in 2008-09, that rose to 4.5 percent. Before the first quarter of this year, 5 percent was the highest market share of mortgages credit unions had achieved during a three month period.
The growth in credit union mortgages surprises even industry leaders. Back in 2006, the Credit Union Housing Roundtable, a group of strategists in credit union housing finance, set a goal of reaching the 10 percent share threshold by 2016. That goal now looks like it might be reached two or three years early and an industry consultant, Callahan and Associates, has upped it to 20 percent by 2020.
What makes the growth even more remarkable is that only about 17 percent of the nation’s 7300 credit unions write the vast majority of credit union mortgages.
To help smaller credit unions that may lack the expertise, personnel or capital to originate mortgages, several Credit Union Service Organizations have gone into business to pool resources and provide mortgage origination services to help smaller credit unions make mortgage loans.
Industry leaders are also exploring ways to access additional capital for mortgage lending by developing investment vehicles to bring credit union issued mortgages to capital markets Finding sources of funds in the capital markets that are an alternative to the GSEs will help them find new sources of housing finance in the face of continued uncertainty about the GSEs and provide them a way of financing mortgages that might not conform to GSE guidelines.