From the mid-1990s until the mid-2000s, credit unions were a tiny fraction of the mortgage business, accounting for just 2 percent of the first-mortgage market, according to the Credit Union National Association, a trade group.
From the mid-1990s until the mid-2000s, credit unions were a tiny fraction of the mortgage business, accounting for just 2 percent of the first-mortgage market, according to the Credit Union National Association, a trade group. But in 2008-09, that rose to 4.5 percent. Before the first quarter of this year, 5 percent was the highest market share of mortgages credit unions had achieved during a three month period.
While full service banks and other traditional mortgage lenders have watched their mortgage businesses decline in recent years, credit unions have doubled their market share and originated 8 percent of all mortgages in the second half of 2012.
The growth in credit union mortgages surprises even industry leaders. Back in 2006, the Credit Union Housing Roundtable, a group of strategists in credit union housing finance, set a goal of reaching the 10 percent share threshold by 2016. That goal now looks like it might be reached two or three years early and an industry consultant, Callahan and Associates, has upped it to 20 percent by 2020.
Industry sources cite service, speed and lower closing costs as advantages credit unions enjoy over other lenders. Closings are generally 30 days faster and credit unions are exempt from state intangible taxes, which can save a borrower several hundred dollars at closing, though a New York Court of Appeals ruled recently that mortgages issued by federal credit unions are subject to the state's mortgage recording tax. Also, credit unions retain a larger percentage of the mortgages they originate, which means that members will only have one financial institution to make their mortgage payment and not have to worry about making a payment to another bank if the loan were sold.
What makes the growth even more remarkable is that only about 17 percent of the nation’s 7300 credit unions write the vast majority of credit union mortgages. Industry leaders are exploring ways to access additional capital for mortgage lending by developing investment vehicles to bring credit union issued mortgages to capital markets Finding sources of funds in the capital markets that are an alternative to the GSEs will help them find new sources of housing finance in the face of continued uncertainty about the GSEs and provide them a way of financing mortgages that might not conform to GSE guidelines.
