Credit unions hit a new mortgage lending record this year, and while low interest rates and rising home values contributed to the growth, some executives said more effective marketing strategies played a role as well.

On Aug. 11 at its annual credit union seminar in Las Vegas, the Chicago-based consumer data firm TransUnion revealed that credit unions captured 11% of U.S. mortgage originations during the first three months of 2015, which represents a four percentage point increase from credit unions' previous first quarter record mortgage share of 7% in 2013.

According to Nidhi Verma, TransUnion's director of research and consulting for financial services, the firm's research revealed two important points relating to credit union mortgage data. First, credit unions saw a smaller percentage drop in mortgage lending than other lenders did when mortgage refinancing slowed, and second, credit unions rebounded more vigorously when purchase money lending began to pick up.

The firm's number crunching showed that while overall mortgage originations dropped by 48% between 2012 and 2014, they only dropped by 24% at credit unions. While mortgage originations increased by 15% overall from Q1 2014 to Q1 2015, they jumped by 35% for credit unions.

“Mortgage originations had declined substantially across the board in the last few years; however, the decline had been less dramatic for credit unions,” Verma said. “In the last year alone, it appears significantly more credit union executives are seeing growth in this area. Credit unions are becoming bigger players in the mortgage loan market, something that may serve them well in the future as the housing market continues to recover.”

Verma also shared data that suggested credit unions have been originating a greater portion of their mortgages to members with lower credit scores or thinner credit files. While mortgage lenders increased originations to borrowers with lower credit scores by 4% in Q1 2015 overall, credit unions increased them by 25%.

“As the U.S. economy continues to recover, non-prime mortgage originations are growing for both credit unions and the rest of the industry,” Verma said. “Historically, credit unions have seen lower delinquency rates than the rest of the industry, and their focus on membership expansion makes them well-positioned to take advantage of this growth.”

Credit union executives who attended the seminar said while they had not made dramatic changes to their mortgage programs to spark the increase, they had taken steps to spread the word to members about their mortgage availability.

At the $2.2 billion, 200,000-member Baxter Credit Union, Vice President of Consumer Lending David Brydun said his credit union had taken a number of online marketing steps to keep mortgages in front of members. These included releasing more notices about mortgages on the credit union's online banking platform and targeting its mortgage communications more tightly to members who were the best prospects.

Brydun also acknowledged that consistently low interest rates and rising home values among members had kept the Vernon Hills, Ill.-based credit union refinancing mortgages longer than other lenders might have.

Stephanie Zuleger, chief lending officer for the $838 million, 97,000-member Y-12 Federal Credit Union, said the Oakridge, Tenn.-based cooperative had maintained a wide variety of mortgage options to attract members, in particular a 0% down, 100% LTV option which, she explained, had been very helpful for sparking conversations about mortgages with members.

“Of course, we underwrite those very carefully, but members hear about that option and want to come in and talk about it, and that gives us a chance to explain the different mortgages available and the advantages a small down payment on the mortgage can have,” Zuleger explained.

The credit union's goal, she added, was to help the member find the mortgage best suited for his or her home buying decision now and into the future.

Transunion also reported the results of a survey of credit union executives in regard to their lending priorities in 2014 and 2015. According to the firm, in 2015, the 90 executive respondents saw auto loans as the greatest opportunity, followed by mortgage loans in second place and credit cards in third place.

Bob Dorsa, president of the American Credit Union Mortgage Association, cautioned that the record 11% reported by TransUnion only represents one quarter's worth of data, and that the overall figure for 2015 may come in lower.

However, he also expressed great satisfaction with the number, and noted that it represents the result of credit union persistence in the mortgage space, as well as consumers' growing awareness of the value credit union mortgages provide.

“It's been a long time coming, but I have to say it's worth it,” Dorsa said, adding that ACUMA has been working to help convince both credit unions and the public at large that credit unions can and should offer mortgages, because it's what their members want.

“Consumers are finally becoming aware that credit unions offer mortgages, and [are realizing] that they might want a mortgage from someone who really cares that they get the right product and doesn't just want to sell them something,” Dorsa added.

TransUnion's Aug. 11 research presentation also included news out of the credit union auto lending space – the firm reported that credit union auto loan terms have been steadily rising.

According to TransUnion, the percentage of credit union auto loans with terms longer than 60 months rose by 15% from Q1 2010 to Q1 2015.

The company also reported that 39% of credit union executives it surveyed said more than 50% of their auto loan originations carry terms longer than 60 months.

Verma contended that the longer loan terms represent both an increase in car prices and sharply lower interest rates that make these more expensive vehicles affordable to average credit union members.

“When you consider the way MSRPs [manufacturer's suggested retail prices] have advanced over the last few years, it's not surprising that loan terms have lengthened,” Verma argued.

She also maintained that the longer terms actually drove much of the auto demand.

“These data points clearly show that greater loan lengths are one of the drivers of growth in the auto market,” Verma added. “In the current low interest rate environment, longer loan durations allow consumers to buy new or used cars with lower monthly payments that fit within their budget. The increase in loan durations shows lenders are meeting those consumer needs.”

She also pointed out that the longer loan terms reflect the reality that many cars are lasting longer, which has encouraged borrowers to consider financing their cars over the course of their cars' long lives.

Instant Insights /

Credit Union Mortgage Lending Soars

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