Credit unions have ensured lending channels remain open despite economic uncertainty surrounding the Coronavirus pandemic. Industrywide, total loan balances increased 6.7% year-over-year and surpassed $1.1 trillion as of March 31, 2020. Thanks to historically low rates, mortgage lending has remained particularly strong and was the main catalyst for overall loan growth at credit unions in the first quarter of 2020.
Originations
With the Federal Reserve keeping the effective federal funds rate between 0.00% and 0.25%, the national mortgage market reported higher refinance activity than purchases in the first quarter. Historically, credit unions have benefited during periods of high refinance activity, and the Mortgage Bankers Association (MBA) predicts this environment will continue through the second quarter of 2020.
According to the MBA, the $306 billion in first quarter refinances accounted for 54% of the overall $563 billion in mortgages originated nationwide. In the first quarter of 2019, $97 billion in refinance production accounted for just 30% of the $325 billion in mortgages originated.
At U.S. credit unions, mortgage originations reached $50.8 billion as of March 31, 2020. This is almost double what credit unions reported in the first quarter of 2019. Likewise, credit union mortgage market share increased 1.0 percentage point over the past 12 months to 9.0%.
Mortgages comprised 36.3% of total loan originations in the first quarter at U.S. credit unions up 13.0 percentage points year-over-year. Of the $50.8 billion in mortgages cooperatives originated, $37.3 billion or 73.5% were fixed-rate mortgages as members sought to lock in low rates over the life of their loans. Balloon/hybrid originations accounted for $9.7 billion or 19.2% of total originations through the first quarter, and adjustable-rate mortgages made up the remaining $3.8 billion, or 7.3%.
FIRST MORTGAGE ORIGINATIONS AND MARKET SHARE
FOR U.S. CREDIT UNIONS | DATA AS OF 03.31.20
Callahan & Associates | CreditUnions.com
Credit union mortgage market share increased 1.0 percentage points year-over-year to 9.0%, the highest rate since 2018.
FIRST MORTGAGE ORIGINATIONS BREAKDOWN
FOR U.S. CREDIT UNIONS | DATA AS OF 03.31.20
Callahan & Associates | CreditUnions.com
In 2020, year-to-date mortgage originations through March reached $50.8 billion, nearly double what was reported through the first 3 months of 2019.
Balance Sheet
First mortgages have fueled lending growth at credit unions. The segment is up 11.2% annually, which represents an acceleration of 3.3 percentage points. Balances in this loan segment reached $484.3 billion in the first quarter and accounted for 42.8% of total credit union loans. The segment has contributed 68.4% of total loan growth during the past 12-months.
FIRST MORTGAGE BALANCES AND ANNUAL GROWTH
FOR U.S. CREDIT UNIONS | DATA AS OF 03.31.20
Callahan & Associates | CreditUnions.com
Mortgage balances increased 11.2% year-over-year accounting for 68.4% of total loan growth at credit unions nationwide.
Fixed-rate loan balances reached $282.0 billion as of the first quarter, making up more than 58% of the first mortgage portfolio. This is up 1.6 percentage points year-over-year as members look to lock in low rates on their mortgages. At $139.6 billion, balloon and hybrid loans accounted for the second-largest share of the portfolio, 28.8%, as of the first quarter. Adjustable-rate mortgages made up the remaining $62.9 billion, accounting for 13.0% of the portfolio.
FIRST MORTGAGE BALANCE BREAKDOWN
FOR U.S. CREDIT UNIONS | DATA AS OF 03.31.20
Callahan & Associates | CreditUnions.com
Fixed rate mortgages make up 58.2% of the credit union mortgage portfolio, up 1.6 percentage points year-over-year.
Asset Quality
Through the first three months of 2020, first mortgage asset quality remained relatively strong at 0.46% as of March 31. This is 17 basis points lower than the delinquency reported across the overall loan portfolio. First mortgage delinquency increased 7 basis points year-over-year but remained at historically low and manageable levels.
FIRST MORTGAGE DELINQUENCY
FOR U.S. CREDIT UNIONS | DATA AS OF 03.31.20
Callahan & Associates | CreditUnions.com
First mortgage delinquency increased 7 basis points year-over-year but, at 0.46%, remains at manageable levels.
As the Fed keeps interest rates low in the hopes of spurring consumer and business borrowing, credit unions will continue to see a growing mortgage pipeline. The MBA projects refinances will total $444 billion in the second quarter and account for 56% of $792 billion in total originations. By extension, this suggests mortgage production growth will continue at credit unions nationwide. For their part, cooperatives have increasingly become more of a financial presence in putting members into a home.