Industry Performance: Mortgages (4Q21)

Larger average mortgage balances have offset the reduced pipeline, and credit unions are holding these loans on their balance sheets at greater rates.

Nationally, mortgage originations for 1-4 single family homes reached $893 billion for the fourth quarter, according to data from the Mortgage Bankers Association and the Federal Reserve. For the 2021 calendar year, mortgage originations hit a record of more than $4.5 trillion. The hold on foreclosures due to the CARES Act was lifted on July 31, but localized relief and consumer income growth kept asset quality strong.

With the Federal Reserve projecting several interest rate hikes in the coming year, the real estate market might begin cooling as borrowers adjust to a higher-rate environment. Refinances, which are most impacted by rising rates, have already begun to cool. They made up only 53% of fourth quarter originations in 2021, the lowest quarterly portion since 2019.

Another important factor in the real estate market is the increasing construction of domiciles. Though supply chain constraints have placed headwinds on home construction, any slowdown in demand will allow time for supply to grow, helping the market to approach a new balance point after two years of supply heavily lagging demand.

Key Points

  • Credit unions originated $80.5 billion in first mortgages during the final three months of the year. This contributed to $314.5 billion in first mortgage originations through all of 2021, the most successful year on record.
  • Although fixed-rate mortgages are still the dominant option, the share of adjustable rate and balloon financing increased 2.0 percentage points from last quarter. The cheaper initial monthly payments might be attractive to borrowers as home prices soar.
  • First mortgage balances outstanding increased 10.8% across 2021 to $578.1 billion as of Dec. 31, the largest growth rate of any major loan product. Mortgages comprise a record 45.6% of the industry’s loan portfolio.
  • First mortgage delinquency improved 2 basis points over the quarter to 0.39% as of Dec. 31, tied for the lowest first mortgage delinquency rate since 2007.

FIRST MORTGAGE ORIGINATIONS AND MARKET SHARE

FOR U.S. CREDIT UNIONS | DATA AS OF 12.31.21
Callahan Associates | CreditUnions.com

Despite increased competition from mortgage lending apps and websites, credit unions gained 36 basis points of origination market share between 2020 and 2021.

MORTGAGE ORIGINATIONS BY TYPE AND SALES TO SECONDARY MARKETS

FOR U.S. CREDIT UNIONS | DATA AS OF 12.31.21
Callahan Associates | CreditUnions.com

At 79.1% of originations in 2021, fixed mortgages are still popular in the low-rate environment. Credit unions are also selling fewer new mortgages than they did last year in an effort to better convert balance sheet liquidity into yielding assets.

OUTSTANDING FIRST MORTGAGE COMPOSITION

FOR U.S. CREDIT UNIONS | DATA AS OF 12.31.21
Callahan Associates | CreditUnions.com

As a portion of the industry’s total mortgage portfolio, fixed mortgages decreased 90 basis points during the past year.


The Bottom Line

Credit unions reported another successful quarter of first mortgage lending and helped more than 291,000 members purchase or refinance a home in the last three months of the year. Still, the quantity of mortgage lending is starting to slow, even as the dollar amount of new mortgage loans hits another annual record.

Larger average mortgage balances have offset the reduced pipeline, and credit unions are holding these loans on their balance sheets at greater rates in recent months, taking on interest rate risk to do so. Ever-growing real estate asset prices make it more difficult for many members to access affordable housing options, and credit unions might need to consider programs to help these left-behind demographics.

Read the full analysis or skip to the section you want to read by clicking on the links below.

AUTO

EARNINGS

HUMAN CAPITAL

INVESTMENTS

LOANS

MACRO

MEMBER RELATIONSHIPS

MORTGAGES

SHARES

March 28, 2022

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