Credit unions auto, mortgage loans outstanding not what they seem at first glance

WASHINGTON – A quick look at numbers showing the percentage of auto and mortgage loans credit unions have outstanding may seem like credit unions are putting more emphasis on the mortgage side of their portfolios at the expense of the loan product that has been the mainstay of CUs’ loan portfolios-auto loans-, but looks can be deceiving, warns a CUNA economist. Tracking data from CUNA for July and June of this year compared to December 2001 and 2000 shows a steady decline in total auto loans outstanding in CUs’ portfolios from a high of 40.0% in Dec. 2000 down to 38.9% as of July 2002. The falloff particularly in new auto loans has pulled credit unions’ total car loans down – from 20.1% in Dec. 2000 to 18.1% as of July. In comparison, total first mortgages being held in credit unions’ loan portfolios climbed from 18.1% in Dec. 2000 to 20.7% as of July, and home equity loans went from 5.9% in Dec. 2000 to 6.6% as of July. CUNA Senior VP and Chief Economist Bill Hampel said, “Changes in credit unions’ loan data has to be chalked up to cyclical factors and are not necessarily indicative of a long term change in credit unions’ lending strategies.” With consumers taking advantage of the lowest mortgage rates available to them in decades, all lenders have seen a significant number of refinancings, and credit unions have picked up their share. Hampel attributed the activity being seen in credit unions’ loan portfolios to short term factors – refinancing activity has caused a shifting of money from auto loans to other loan products; and aggressive 0% financing offers from dealers and captive financing companies have made a dent in some of credit unions’ share of the auto loan market. “But that’s not to say that mortgages are now more important to credit unions than auto loans are,” said Hampel. As mortgage rates rise, he said credit unions shouldn’t be surprised to see a shift in mortgage volume. This will be particularly true for large credit unions. For those credit unions with under $100 million in assets, car loans continue to be predominant, he said. Hampel predicted that “for the next decade, auto loans and mortgages will continue to rival each other.” Together, the two loan products account for 80% of CUs’ loan portfolios, and Hampel doesn’t think that will change. -