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More Consumers Head to a Credit Union for a Mortgage

More Consumers Head to a Credit Union for a Mortgage By Gina Ragusa
Published August 24, 2012
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Credit unions are becoming the obvious choice for mortgage loans as Callahan & Associates reports that the industry originated its highest loan volume to date during second quarter.

“Credit unions have stepped up their role over the past five years as the mortgage lending market has undergone an unprecedented transformation,” Jay Johnson/EVP at Callahan stated in a release. “The key for credit unions will be in continuing to drive these trends as the housing market shifts from a refinance to a purchase market.”

Callahan’s data shows that credit union mortgage loan activity through the first six months of 2012 totaled $157 billion, de-throning the previous record of $144.3 billion generated during the first six months of 2009.

Gilbert Chavez, Director of Mortgage Lending at Consumers Credit Union ($580 million, Mundelein, IL) says that 2012 mortgage loan origination levels are outpacing what his credit union experienced in 2009 as well.

“We originated our highest level in 2009, which was a little under $110 million,” Chavez recalls. “However, right now we are reporting, year-to-date at around $60 million. I anticipate we should hit at least $100 million by year’s end.”

In 2009, other credit unions like Bethpage Federal Credit Union ($3.7 billion, Bethpage, NY) and NEFCU ($1.2 billion, Westbury, NY) experienced a tidal wave of refinances fueled by low rates and new disgust with the big banking industry.

Kirk Kordeleski, Bethpage’s CEO told a Long Island, New York business news publication in April 2009 that numbers continued to climb. “We have seen each and every week applications that topped the previous week, with numbers like 50-plus closings a day where we would do only five before.”

Mortgage News Daily reports that average mortgage rates were at 5.24% for a 30-year fixed loan in August 2009. Today a borrower can obtain a 30 year fixed product for a rate as low as 3.75%.

Daryl E. Empen, President of Gas & Electric Credit Union ($59.8 million, Rock Island, IL) says that people recognize that rates may have reached rock bottom and are coming back to the credit union to shorten loan terms and reduce costs. “Many members are asking for a 10 or 15 year mortgage that allows them to not only shorten their term but with rates this low, they are still saving money."

Refinances Are Pushing Originations, But Purchases Are On the Rise

“We’re seeing a 75/25 split between refinances and purchases,” Chavez says. “HARP 2.0 is a big reason why we are seeing more refinances. Almost 25% of our refinance applications are HARP deals and we also started advertising HARP to help with the refinance volume.”

Additionally rates are just far too enticing, experts contend. “Every time rates went down over the past year, I said they can’t possibly go lower,” said Marsha Schultz, AVP/Navy Federal Credit Union ($48 billion, Vienna, VA). “And I’ve been in business long enough to have seen rates at 18 percent.” Schultz adds that the credit union has experienced a 98% increase in the number of refinances over the past year.

Although refinances appear to be dominating the market, credit unions are reporting that first mortgage originations are healthy and on the rise.

“We have seen a 20% increase in purchase transactions year-over-year,” Chavez says. “We are interacting more with Realtors, which has certainly helped.”

Record Mortgage Levels Generates More Members

For many credit unions, the onslaught of mortgage originations has also produced additional opportunities --more exposure to prospective members.

“Credit unions are continuing to build momentum in the marketplace and are increasingly seen as a go-to source as consumers look at their financial options,” Johnson says. “We are seeing this in lending trends, which are following the acceleration in membership growth across the country. Members are not only joining credit unions, they are also bringing with them their full financial relationships.”

“Even though we have a closed field of membership, we are able to reach more potential members within our select employee groups because of the attractive mortgage opportunities,” Empen says. “Current members will tell co-workers and family members about the kind of service they received, which essentially is allowing us to cultivate more members.”

Chavez believes that credit unions should use this opportunity to deepen relationships and retain members. “My belief is that eventually banks will get back in working order and when they do people will forget how they were treated and may possibly forgive.”

“How we handle the post closing process and service the mortgages will leave an indelible impact on the member. The industry has come a long way over the past few years and we can’t risk losing everything we’ve worked and fought so hard to achieve. So while we are good at originating, closing and funding those loans the test will be how we retain them.”

Ready to refinance or purchase a home? Find a credit union and compare service and rates to the big banks.

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