Credit Unions Steady Amid Mortgage Market Turmoil

With 168 First Look credit unions reporting second quarter data, credit unions continue to outperform the market in mortgage originations.


“Wall Street is Down, but Not Out”….. “Fed Fires in Some Liquidity” … “Stock Market Volatility Rattles Investors”.  These were just some of the closing headlines on Friday seen on, Forbes, and the Washington Post, respectively.  Much of the recent turmoil in the stock market is due the credit markets, and more specifically the mortgage markets, as loan quality issues lead lenders and investors to pull back from the market.

With preliminary second quarter real estate data available through Callahan’s First Look program we are able to see how this market’s volatility has affected credit unions throughout the US. While most would expect a significant drop in real estate lending and a growing number of delinquencies, early results indicate that credit unions continue to show healthy activity.

Beating Market Results
First mortgage originations for credit unions continue to outperform the market, growing at 4.9% for First Look credit unions.  Originations actually decreased the year before by 1.0% for the same group of credit unions.

Overall however, real estate lending has slowed among First Look credit unions through the second quarter.  However, with purchase mortgage volume forecast to be down over 12 percent through the second quarter by the Mortgage Bankers Association, the growth rate of total real estate originations for First Look credit unions was –4.0% this year in comparison to 7.4% during 2nd quarter last year. All other real estate loans had a growth rate of –16.9% as opposed to the 21.3% in 2006. In comparison, the financial services industry as a whole is forecast to increase originations by 0.6% through the second quarter of 2007.

One of the key areas that is receiving headlines is the rise in real estate loan delinquencies. Again, First Look credit unions post solid numbers with a delinquency rate on first mortgage loans of .23 percent as of June 2007 compared to a .18 percent rate one year ago.  Compare this to the 4.9 percent delinquency rate just released by the nation’s largest mortgage lender, Countrywide Financial, up from 3.9 percent as of June 2006.

A New Opportunity
Credit unions have an opportunity to break through in the real estate market by providing stability and great member value as many other lenders pull back. Credit unions are not immune to the issues that the rest of the financial industry is dealing with but have a liquidity advantage since they are funded primarily by deposits as opposed to the debt issuance that most financial institution competitors rely on.  The First Look results indicate that credit unions are also continuing to underwrite loans prudently and avoiding many of the difficulties other lenders are suffering through.

Just as many consumers struggle with monthly payments as interest rates and monthly payments adjust, many mortgage lenders are retreating from the market.  This could be the best time for credit union value to reach a new group of potential members.




Aug. 13, 2007


  • Right On...article! Example...the Houston market missed the wild appreciation spikes of the last few years BUT is now considered an attractive market for purchasers. The CU industry''s conservative approach to home lending can now be leveraged into a "trust" strategy. It''s a great time to increase the CU market share!
    Roger Conant