Credit Unions Weathering the Storm

As stories on home foreclosures continue to make front page news, how are credit unions faring in this storm of a housing market?

 
 

“Foreclosures Rose to Record Pace in First Quarter” (Reuters)

“Looking for Ways Out of the Subprime Mortgage Crisis” (CNN.com)

“Homes Going Once, Going…” (Wall Street Journal)

Each morning, you can find a headline similar to the ones above in a major news publication or website around the country. Those individuals who were locked into alternative mortgage products directed towards those with less than stellar credit are now having to face adjusted rates that have skyrocketed.

The National Picture

According to the Mortgage Bankers Association (MBA), California, Florida, Nevada, and Arizona comprise the top four states driving this high foreclosure rate in the first quarter of 2007, with the national rate standing at 0.58%. However, the national foreclosure picture may not be as bleak as believed.

Douglas Duncan, chief economist of the MBA, said in a statement, “ The percentage of loans in foreclosure would be well below the average of the last 10 years were it not for Ohio, Michigan and Indiana, and the rate of foreclosures started nationwide would have fallen were it not for the big jumps in California, Florida, Nevada and Arizona.”

The More Calming Credit Union Picture

How are credit unions faring on a state and nation-wide basis when using various proxies of foreclosure?

When looking at total repossessed and foreclosed real estate assets as a percentage of first mortgages outstanding, the national credit union average stands at 0.12%. This is significantly lower than the national average stated by the MBA.

State # of CU's
Foreclosed RE/ Total 1st Mortgages
Total Repossessed & Foreclosed RE

Michigan

374

0.39%

34,650,237

Ohio

440

0.20%

6,250,320

Indiana

213

0.17%

7,369,270

Nevada

28

0.07%

913,275

Arizona

56

0.07%

1,156,322

California

536

0.06%

20,442,189

Florida

202

0.02%

1,467,752

Analyzing the credit unions mentioned by the MBA, their foreclosure rates are all well below the national average stated by the association. At 0.39%, Michigan has the highest rate, foreclosing $34.7 million in real estate assets. Mortgage quality for credit unions remains strong looking at these results.

Another measure we can use to see approximate foreclosure rates is using the 12-month delinquencies of first mortgages a year ago as a percentage of first mortgages outstanding. Those first mortgages that were over 12 months delinquent at this time would be those most likely in the foreclosure process currently. Using this proxy, the national credit union rate stands at 0.03%.

State

# of CU's

12-mo Del. Lns/Total 1st Mortgages

Total 12-mo Del. Lns as of 1 yr. ago

Indiana

213

0.12%

4,927,201

Ohio

440

0.11%

3,537,503

Michigan

374

0.04%

3,674,044

Florida

202

0.01%

1,013,782

Arizona

56

0.00%

0

California

536

0.00%

118,501

Nevada

28

0.00%

5,876

When comparing this measure to the previous, it is evident that these values are also significantly below the national average stated by the MBA. However, one interesting trend that arises is that the top three states in each measure for credit unions are “rust belt” states, whereas the others are more attractive real estate markets.

While the first measure may be a more accurate way of viewing a foreclosure rate for credit unions, the delinquency measure becomes interesting when using as a comparison. No matter which measure is used, the national average for credit unions is consistently below the national average by significant margins. As credit unions continue to provide mortgage products that fit a member’s needs and means, delinquencies and foreclosures remain minimal in this unfriendly housing environment. In fact, it presents an opportunity for credit unions to gain more business as other lenders pull back from the market.

 

 

 

July 2, 2007


Comments

 
 
 

No comments have been posted yet. Be the first one.