WASHINGTON — Direct and indirect mortgage losses are hitting credit unions, but unlike banks, the latest financials report some good news, too.<p>Topping the list of industry accomplishments revealed in Callahan & Associates' second quarter Trendwatch report was an all-time high in loan originations, $134.2 billion as of June 30. </p><p>Leading the charge was a 40% gain in first mortgage originations from June 2007.</p><p>Bank lending standards have spiked, resulting in more mortgage denials, so applicants looking elsewhere are a big factor, said Callahan Executive Vice President Jay Johnson. And, he added, around 200 mortgage lenders have exited the market in the past year, so there are fewer competitors in the marketplace.</p><p>But given the extremity of the bust in the mortgage and banking sectors, is 40% enough to brag about? Forty billion in originations is a nice leap from the typical $30 billion second quarter year-to-date numbers, but, it still represents less than 4% of mortgage market share.</p><p>"Yes, it could always be better, but we're seeing a big shift, unlike anything before, in terms of market share gain," Johnson said. He pointed out that $40.6 billion originations year to date could mean serious gains by year-end, especially considering the first six calendar months of the year don't include summer's top real estate months. And, credit unions have seen a </p><p>steady increase in originations every quarter for the past 18 months, while other lenders have seen originations fall.</p><p>"Is there room to grow? Yes, but credit unions aren't just lending to lend, and I think that's reflected in their delinquency numbers," he said. "And, the fact is, many are taking advantage of this opportunity."</p><p>Delinquencies are something to brag about, especially considering that credit union and bank numbers aren't comparing apples to apples. Johnson pointed out that credit union delinquency reporting to regulators includes all loans 60 days past due. Banks don't have to report loans delinquent until 90 days past due.</p><p>So while credit union delinquencies inch dangerously close to 1%, bank delinquencies are already over 2%, and thanks to reporting inconsistencies, the credit quality gap is even wider than it appears, he said.</p><p>The chickens come home to roost in the charge off numbers, especially in real estate lending.</p><p>Credit union first mortgage charge offs: 0.069%. FDIC-insured institution first mortgage charge offs: 0.98%.</p><p>Credit union home equity charge offs stood at 0.52%, while FDIC-insured home equity charge offs were 1.79%.</p><p>Fueled by provision increases, Arizona and California credit unions reported statewide negative return on average assets numbers for the second quarter. However, Johnson pointed out, eight states reported overall negative bank ROA. And, California numbers include two failed credit unions, while Arizona's numbers include massive losses from the state's second largest credit union, $1.9 billion Arizona Federal Credit Union.</p><p>Take California's two failed credit unions out of the equation and the industry turns a profit, Johnson said.</p><p>Arizona does too, when AFCU's $42.5 million losses aren't factored in. According to figures provided by the Arizona Credit Union League, the state minus AFCU would have actually turned a profit, albeit a small one, $6.65 million.</p><p>Some states are even reporting declines in loan allowances, including Nebraska, Delaware and Arkansas.</p><p>The common bond of credit unions help the industry weather regional woes, Johnson said.</p><p>"The market really depends on where you are, and that's an advantage to primarily local credit unions, because a lot of national lenders have pulled back," Johnson said. </p><p>Johnson also pointed out that rust belt states are beating national ROA averages.</p><p>"In Ohio and Michigan, areas that have been in the headlines, you'd guess there would be problems," Johnson said. "But, in fact, you'd find that Michigan had an ROA of 0.60%, and Ohio 0.56%, so even there, credit unions are performing well." </p><p>–[email protected]</p><p> </p><p> </p>