Credit unions worked hard in 2011 to continue to build theirhousing finance programs even as the overall housing industrycontinued to struggle with low home prices, high foreclosure ratesand significantly tighter mortgage underwriting rules.

The chief problems in the overall housing industry were thecontinuing dilemmas launched in the housing finance crisis in 2008and 2009.

The first wave of housing problems that hit in 2010 had beenhousing prices that continued to significantly fall from theirpreviously inflated highs. Those falling prices trapped homeowners into mortgages that were wellabove the property’s current worth.

Some homeowners sought to escape the trap by simply walking awayin strategic defaults on their loans while others sought shortsales for their properties and, for the first time ever, creditbureaus reported that consumers in economic difficulties had begunto make their credit card and auto loan payments before they paidtheir mortgages.

Other consumers sought to refinance their loans but often foundtheir current property value too low to refinance, or they soughtout one of the loan restructuring options offered by the federalgovernment only to never be able to get through the process.

Credit unions in general were not part of this problem as manyof them had even retained the servicing on the loans they had soldinto the secondary market and were thus able to more easilyrestructure their loan terms. But the scope of the problem atlarger banks meant that the industry entered 2011 with arecord-setting glut of retail property owned by financialinstitutions, further depressing home prices.

By contrast, in 2011 the broader housing finance industry wasfaced with mortgage delinquencies and foreclosures arising lessfrom the housing bubble breaking and more from the ongoing economicrecession and high unemployment.

These tended to have more impact on credit unions since CUs hadnot generally made the sorts of risky home loans often found in thehousing bubble and which tended to characterize foreclosures in2010. In 2011, with job losses and other elements of the downturnmore prevalent, CUs began to find themselves with property on theirbooks, some for the very first time.

This led some CUs to hire property management firms and one CUto partner with another. Mountain America Financial Services, awholly-owned subsidiary of Mountain America Credit Union, a federalcredit union based in South Jordan, Utah, with $2.9 billion inassets and roughly 354,000 members, announced in June that it hadpartnered with Green River Capital, a nationwide propertymanagement firm, to offer Green River's services to other CUs.

Meanwhile another CU, the $517 million Orion Federal CreditUnion in Memphis, Tenn., started 2011 with a program to make sureits own members had first crack at its REO.

The HomeRun Program allows financially stable members–who nonethelesshave poor credit histories, an inability to obtain mortgagefinancing and lack a down payment–to purchase the real estate ownedby the CU. According to the credit union's call reports, Orionforeclosed and repossessed on 34 real estate loans worth $1.8million as of the last quarter of 2010.

Members in the program will rent one of the Orion-owned homesfor two years, making regular monthly payments, and attend afinancial education course offered by the RISE Foundation, a notedMemphis-area housing organization. At the end of the two-yearperiod, the CU will sell the property for less than its taxassessed value and apply the member’s two years of rent as downpayment.

"The goal for this program is to get good people, who may havehad some financial troubles in the past, into a nice and affordablehome," said Daniel Weickenand, CEO of Orion. "This will stabilizecommunities by putting ownership back into the hands of ourneighbors."

But even as the overall housing finance industry continued tobump along, credit unions kept working to publicize their housingfinance programs and chase more purchase money loans as opposed tomortgage refinances. Some of these have included persistent themesfor credit unions, such as reaching out to Realtors and tighteningup housing finance programs to better meet the tighter deadlinesrequired by purchase money loans.

And 2011 brought indications that CU’s efforts had begun to bearfruit. For what may be the first time ever, a credit union becamethe biggest source of housing finance for a major metropolitan areain the U.S. in 2011.

According to data collected by the Federal FinancialInstitutions Examination Council, more home purchasers in theMadison, Wis., area chose the UW Credit Union to finance their home loans than any otherlender in 2010, the latest year for which data was available.

FFIEC collected home mortgage data and published a report on the2010 data in September 2011. The Madison statistical area includesthe Dane, Sauk and Iowa counties and includes over 500,000residents. The report indicated the credit union had lent $83million in money to fund new real estate loans in 2010.

“This is the first time the federally published data hasreported a credit union in top position for home purchase financingin the Madison metropolitan statistical area,” said Paul Kundert,CEO of UW Credit Union, when the data was announced. “Although homepurchase volumes have been trending down, our home purchasemortgage lending market share has been on the rise and has morethan doubled since 2005.”

And there are some signs that housing finance will improve in2012. TransUnion, one of the nation’s three national creditbureaus, has forecast lower mortgage delinquency rates in2012.