Credit Unions Cash in

Written by: Steve Cook   Fri, August 13, 2010 Beyond Today's News, Consumer Trends

Yesterday Navy Federal Credit Union in Vienna, Virginia announced that it expects to close a billion dollars’ worth of mortgages between July and August. Last year, Navy Federal, which happens to be the world’s largest credit union, originated mortgages totaling $6.2 billion, a new record. With the help of record low interest rates, it plans to break $7 billion this year.

Navy Federal’s numbers suggest that credit unions are no longer small potatoes in the mortgage markets.  When traditional banks and thrifts are reining in, credit unions are grabbing market share in mortgages at a rate no one would believe a few short years ago.

The credit union industry as a whole originated $95 billion in residential mortgages in 2009, a 4.5 percent share of the nation’s mortgage business.  Though many smaller credit unions do not do mortgages, mortgages still accounted for a growing share of the total $271.9 billion in new loans made by credit unions last year, a 7.1 percent increase over 2008, according to data released by Callahan & Associates, a Washington, DC-based financial consulting firm that specializes in the credit union industry. At the end of 2009, the credit union industry held $314. billion in real estate loans in 2009, up 1.52 percent from 2008’s origination level, according to Housing Wire.

Credit unions have their share of challenges. Their rates are marginally higher.  It might take longer to close on a credit union loan, especially with a smaller, community credit union. Credit unions tend to retain loans, including mortgages, rather than sell them to be securitized in the secondary markets.  Thus their exposure to delinquency and foreclosures has been greater than many other lenders. However, credit unions generally avoided subprime lending and the alternative mortgage products that spelled doom for lenders like Countrywide and Washington Mutual.  A recent study by the California Department of Financial Institutions found that of the state’s $641 million in delinquent non-traditional real estate loans, 99 percent were held by banks and 1 percent by credit unions.

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