Credit unions may have their best opportunity ever to boost theportion of mortgage loans that actually go to purchase homes asopposed to loans that refinance previous notes.

Many credit unions seek to build up purchase-money loans as ahedge against the day when the numbers of refinance loans declineand because they often include significantly more cross-sellingopportunities.

The signs that the demand for purchase-money loans is rising inthe housing finance industry overall are becomingwidespread. 

The Mortgage Bankers Association reported that applications forpurchase-money mortgages rose 7% for the week ending Jan. 18,equaling a high that it had not reached since May 2010 when thefederal government offered a tax credit for purchasing a newhome.

“This increase in purchase applications was primarily forconventional loans, as the seasonally adjusted conventionalpurchase index was at its highest level since October of 2009,” theassociation reported. “The unadjusted purchase index increased 9%compared with the previous week and was 26% higher than the sameweek one year ago.” 

Key housing indexes such as the Federal Housing Finance Agency'sexisting home sales moved sharply higher, going up 5.9% in Novemberto a 5.04 million annual rate, following a 1.5% rate in October,according to the regulator for Fannie Mae and Freddie Mac. Also,the FHFA purchase-only house price index gained 0.5% in Octoberafter remaining virtually unchanged in September. New home salesalso moved higher in November, with sales up 4.4% to an annual rateof 377,000, hitting a two-year high. New homes sales, which startedin 2012 at 340,000, have slowly been building up.

Signs among some credit unions are also positive, with the98,000-member $1.13 billion Partners Federal Credit Union reporting that it concluded adeal with the housing finance CUSO CU Realty Services in order to help it meet the demand for whatit called a coming surge in demand for purchase-money housingloans.

The Burbank, Calif., credit union serves the employees of theWalt Disney Co. and their families around the country.

“Building relationships with Realtors certainly strengthens ourpurchase-mortgage business,” said Michael Terzian, the creditunion's vice president of marketing and business development. “Butmaintaining a network of qualified agents in multiple cities in twostates would be very difficult for us to achieve. CU Realty ismaking it easy because they provide a network of knowledgeable realestate professionals.” 

Terzian explained that the credit union provides services tolarge groups of members in Burbank and Anaheim, Calif., and centralFlorida, mostly around Orlando. But the credit union also has asignificant number of members from more widely spread parts of theDisney company, such as Northern California where the Pixar movieanimation firm, now a Disney-owned company, is located.

The credit union decided to get ready for a rising demand forpurchase-money loans because members were already signaling thatdemand, Terzian explained. 

“We hold periodic housing finance seminars, sort of to quietlymarket the credit union as a mortgage provider but really toexplain the mortgage process to our members,” Terzian said.Starting in mid-2012, Terzian said, the number of members attendingthe meetings climbed sharply and that the questions changed fromhow they could buy a piece of property in foreclosure as aninvestment to how they might buy a piece of property to live in.

“I think there were a number of members who had been sitting onthe sidelines and hadn't been ready to come in, but that acombination of a shrinking number of houses in their areas andrising rents had helped them make the decision,” he said. Signingup with CU Realty Services had been part of the effort to meetthose needs, particularly for members who were not in Burbank,Anaheim or central Florida, he explained. 

CU Realty Services seeks to help participating credit unionsbecome the first point of contact for their members, whether theyare buying or selling real estate. Making the credit union thesource of both information about potential home purchases or salesand Realtors ready to help credit union members at a reduced costshould help the credit union capture more of the purchase-moneylending, the credit union hopes.

Terzian forecasts that, unless something like another economicdownturn occurred, the credit union could see as much as 35% to 40%of its housing finance loans this year be purchase-money loans. Healso said Partners was looking for an overall mortgage volume of$275 million this year, up from the $260 million the credit uniondid in 2012 with a 30% share of its business in purchase-moneyloans.

“We created CU Realty Services as an advantage to both creditunions and their members,” said CUSO CEO Mike Corn. “Over the pastdecade, we've recruited and trained more than 400 Realtors in 20states and numerous metro areas. And credit union members havesaved millions in closing costs–over $2.2 million in 2012alone.”

Corn said the firm had been hearing from member credit unionsabout increased demand for purchase-money loans and noted that insome markets, like Phoenix and Washington, D.C., its credit unionpartners were being hampered in their purchase-money business by alack of available properties.

“I think credit unions have finally turned the corner aboutletting their members know they make mortgage loans and inimproving their housing finance programs and operations,” Cornsaid, adding that he believed credit union loans officers have abit more room to be flexible with borrowers as well as a reputationas local lenders that also helps them compete.