2003 Was a Great Year for CUs' Mortgage Activity; Can They Keep it Up in 2004?
MADISON, Wis. - Need reassurance that 2003 was a great year for credit union mortgage lending activity? Preliminary results for the year are in from CUNA Mutual Mortgage, and they show 2003 was a record setting year all around. Data shows that CUs originated $88.2 billion in member first mortgages...
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MADISON, Wis. – Need reassurance that 2003 was a great year for credit union mortgage lending activity? Preliminary results for the year are in from CUNA Mutual Mortgage, and they show 2003 was a record setting year all around. Data shows that CUs originated $88.2 billion in member first mortgages during 2003. In total, just over 719,000 first mortgages were funded. During 2003, a total of 4,169 credit unions reported originating $10,000 or more in member first mortgages, representing an increase of 183 credit unions that reported doing so in 2002, and 392 CUs in 2001. “The number of loans granted and the dollar volume was consistent and steady, and most certainly the growth of the marketplace contributes to that. But you can’t minimize the fact that credit unions kept pace with a growing market and didn’t miss the opportunity to participate,” says CUNA Mutual Mortgage’s SVP/COO Dan Rotert. “The numbers clearly demonstrate that credit unions recognized the opportunity and took advantage of it,” he adds. The only area where credit unions showed a decline in 2003 from 2002 was in market share – 2.32 from 2.51, respectively. But that doesn’t upset Rotert. While credit unions’ market share may have slipped, he points out that the volume of lending actually increased – CUs granted 37.6% more loans in 2003 than they did the previous year. Rotert offered that CUs’ decline in market share “speaks to the issue of capacity rather than credit unions’ ability to market to their members,” referring to the saturation of the market starting from the middle of 2003 because of the record low rates. “The decline in market share is not a knock against credit unions,” he says. Rotert explains that, “Credit unions were trying to drink from the fire hose to accommodate the demand in the marketplace. The fact that they dropped 1.9% in market share when the market grew is really not representative of credit unions’ participation in the market. What it does show is that the mega-lenders like Washington Mutual, Well Fargo and Countrywide had better manufacturing facilities and could respond to volume demand quicker and more expediently than credit unions.” In fact, he adds, “I would suspect if we looked at the community bank segment, we’d see the same thing.” Instead of dwelling on credit unions’ drop in market share, Rotert says the message needs to be emphasized that credit unions kept pace with demand in the market and increased the number of mortgages to their membership in a significant amount. Although mortgage rates haven’t gone up yet as much as experts predicted, the demand for first mortgages has already fallen off. “Now is really going to be the test for credit unions to play in the mortgage market. The pie has shrunk, and that means credit unions are going to have to be more competitive and market more of their mortgage products to their members to maintain their market share in a shrinking market,” he explains. Rotert isn’t ready to sound the call to arms – yet. He’s willing to wait to see what happens to CUs’ market share numbers as 2004 progresses. If the number and dollar volume of first mortgages granted by credit unions start to slip, then it will be time to do something, he said. Market share has to at least remain the same, otherwise it shows stagnation or shrinkage in growth of credit unions’ presence in the mortgage market. “2004 will be the acid test,” says Rotert. “It doesn’t matter how much the market shrinks. If credit unions market to their members and meet their demand, that’s where credit unions will have to keep up their momentum,” he says. “The last two years have been baptism by fire for credit unions in the mortgage arena, and their appetites have been wetted. But this year, the rules have changed. Now credit unions have to market and drive their mortgage products to their members.” To do that, Rotert suggests credit unions have to be willing to break out of the comfort zone and be willing to compete on all fronts with all the variations of mortgage products that are available, including offering non-standard products to credit challenged borrowers, as well as sophisticated products to members with good credit histories. He opines credit unions suffer from a “knowledge gap of what’s available and how to execute it.” But credit unions have to “get beyond that, step up to the plate, and get comfortable with all the variations of mortgage products that are out there.” “Credit unions can compete with the Countrywides and other mega lenders. It’s critical that they don’t open the door for their competitors to take their members’ mortgage business away. Credit unions have to become savvy and look for product variations to meet their members’ unique demands,” says Rotert. -
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