Recently released data from the Federal Reserve may help credit unions to identify areas where consumers are most likely to need help with mortgage loans. The data comes as September foreclosure filings rose 99 percent from the prior year according to data from RealtyTrac. Although down 8 percent from August’s record results, the numbers point to continued challenges for borrowers as home prices decline and lenders tighten underwriting standards.
In response to these conditions, Countrywide Financial, the nation’s largest mortgage lender, last week announced that it would make it easier for customers holding $16 billion of adjustable rate mortgages to refinance their home loan with the company. While Countrywide’s efforts may provide relief to some of its customer base, an estimated $1 trillion of adjustable rate mortgages are due to reset through the end of 2008. With more than 175 mortgage lenders either permanently or temporarily shut down over the past year according to a website tracking the industry (www.ml-implode.com), many consumers will be looking for options.
Credit Union Opportunities
As other lenders retreat, credit unions continue to be active in the mortgage market. Credit union mortgage volume of $28.9 billion through the first half of 2007 is the highest in four years. Liquid balance sheets supported by deposits means credit unions have not been subject to many of the market forces faced by lenders that relied on Wall Street for funding.
A number of credit unions are thus seeing the current environment as an opportunity to establish new mortgage lending relationships with borrowers who may not have turned to credit unions in the past. Some are working with credit scoring companies to identify current members who may have first mortgages elsewhere. Some are also looking to reach out to potential members who might be looking for refinancing options. But how can these potential opportunities be identified?
A recent report released by the Minneapolis Federal Reserve has determined that the most accurate and simple method for identifying where delinquencies and foreclosures are most likely to occur is to rank neighborhoods by the percentage of households with lower credit scores. The Fed tracked the data by working with one of the credit bureaus. Although unable to provide household-specific data, the Federal Reserve is now providing maps and other summary data by census tract on areas that are most likely impacted by ranking both the percentage of households with lower credit scores and the percentage of households with mortgages that have a lower credit score. Maps of the states covered by the Minneapolis Fed can be accessed at http://www.minneapolisfed.org/pubs/fedgaz/07-09/foreclosures.cfm. Other Fed Districts also have access to such data.
Although the mortgage lending environment has changed since the Minneapolis Fed performed their research, the information provides credit unions with one more way to identify the likelihood of consumers in their market facing mortgage loan difficulties. As other lenders face asset quality issues or funding problems, credit unions have an opportunity to assist consumers in need and make their presence felt in the mortgage lending market.