The term "emerging markets" has become popular to identify the multicultural consumers-African Americans, Hispanics and Asians-who are key to the future success of so many American businesses, including America's credit unions. Credit union conferences and published articles are awash with the term when identifying new opportunities to grow and serve their membership in 2006. It's all true-in fact, the emerging markets are fast becoming truly surging markets, with minorities constituting the fastest growing segment of our nation's population. Credit unions are uniquely placed to meet the challenges of delivering high-quality, affordable financial services to these growing markets. The needs-and the opportunities for credit unions-are undeniably vast. In the next decade, our nation is expected to add 27 million new people, creating 13 million new households. Minority families will represent 80% of this population growth. By 2015, minorities will account for two-thirds of growth in the number of households and one-third of our country's population, according to the Census Bureau and Harvard University Joint Center for Housing Studies.
These new families will continue to drive the growing housing market, needing access to more homes and raising our country's demand for mortgage capital to an estimated $30 trillion over the next 10 years. While homeownership rates remain at all time highs, minority rates still lag the national rate by nearly 18 percentage points. This population surge in multicultural markets presents a unique opportunity for credit unions to expand their reach to these markets and leverage current membership relationships in a tangible way.
As community-based trusted advisors, credit unions have an incredible opportunity to bring affordable mortgage solutions to surging markets. In addition, owning a home is the No. 1 wealth-building tool for today's families. Offering home loans also helps credit unions tap into a younger market segment. Consider this: The average age of a credit union member today is approaching 50 (according to NAFCU), however the median age of the Hispanic consumer is just 27, African American consumer is 31 and Asian consumer is 35. The mortgage market is an ideal, affordable entry point into credit union membership for young surging market families.
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Credit unions can also offer an important alternative to high-cost loans from predatory lenders that are often prevalent in our nation's undeserved markets. In fact, according to the 2004 Home Mortgage Disclosure Act data, credit unions have a mortgage approval rate for low-income minority families of 66%, surpassing the 59 percent approval rate of banks and thrifts. Within all low-income families, credit unions have an approval rate 10 percentage points higher than that of other financial institutions. Community and underserved areas are an important component to membership service and growth, and mortgage lending continues to be a growing business segment. In fact, by the end of 2010, more than 45% of first-time home buyers will come from our country's multicultural markets.
While much opportunity for homeownership exists, the challenge of affordability is still paramount. Many in the mortgage finance industry are concerned about affordability for three major reasons: Housing costs are going up. Rising home prices may be great for people who already own homes, but they pose significant barriers for those trying to buy their first one. Nationally, affordability has fallen to the lowest level since 1991, primarily because of the sharp rise in home prices in recent years. Home buyers are taking more risk. To deal with high prices, and get into a home before prices rise even higher, many first-time home buyers are taking on alternative mortgages-such as Interest Only and Adjustable Rate Mortgages with negative amortization-that may have the lowest monthly payments, but also have a greater risk of payment shock a year or two later. Overextended borrowers could lead to higher defaults and foreclosures, and result in the American Dream unrealized or deferred for many families. Credit unions can help their members of modest means tackle the affordability issue through careful lending, affordable mortgage options, consumer education and offering programs to ensure that first-time buyers are able to retain their homes. To assist credit unions in their mortgage efforts, Fannie Mae created an alliance with NAFCU in 2002, the first such alliance between Fannie Mae and a credit union trade association. The alliance eliminates some of the barriers credit unions face in originating loans and selling them to the secondary market. Since 2002, more than 120 credit unions have joined the alliance and have been able to pass on the benefits of low-cost home loans to their members. When credit unions work with the secondary market, gaining access to the capital markets and improving mortgage services, they can compete more effectively with the largest financial institutions in the country. Now, the alliance is expanding its benefits for credit unions with some major enhancements, including updates on pricing, training, market analysis and technology.
The new enhancements to the alliance will give credit unions more effective tools for reaching underserved markets. While reduced pricing has always been a benefit in the alliance, the alliance will now offer even better member pricing for certain lenders in the secondary market for fixed rate mortgages including biweeklies and the 40-year mortgage. Initially a pilot for credit unions, Fannie Mae's 40-year mortgage is growing in popularity and is now embraced by more mainstream lenders. Better pricing on this and other types of loans will help give credit unions the advantage they need to help more members get into homes with affordable loans. Other enhancements include a Web-based application tool for automated pricing and committing processes so credit union staff can manage pipeline risk more quickly. And, to aid in the affordable lending focus of credit unions, members can access market analytics for up to five targeted Metropolitan Statistical Areas, and receive product education and training and assistance in developing an outreach strategy, as resources permit.
In 2004, Fannie Mae made a major commitment to join with partners throughout the housing industry to tackle America's toughest housing challenges, including eliminating the homeownership rate disparity for minority families, combating predatory lending and increasing housing affordability. Credit unions are an ideal partner for these efforts. Stronger communities, safer neighborhoods, and improved local economies are just a few benefits of home ownership.
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