While credit unions experienced lending growth in the second quarter overall, NCUA data show that CU mortgage lending really took off. According to research from Callahan & Associates, credit unions captured 5.2% of the overall market in first mortgages in the second quarter, up sharply from the 2.0% they held in June 2005.Jay Johnson, an executive vice president with the credit union industry consultancy and data analysis firm, said credit unions performed so well in part because credit unions have become stronger mortgage competitors but also because they have kept lending during the economic downturn."While other lenders have been tending to lend less during this downturn, credit unions have been continuing what they have been doing and even expanding their mortgage role a bit," Johnson said.He also noted that credit union first mortgages have been helped by the efforts to refinancing troubled first mortgages from other lenders. When a first mortgage is refinanced, as opposed to modified, it is considered a first-mortgage origination, Johnson explained."Credit unions have taken a lead in both fixing what has been wrong, when possible, from other lenders but as well have started to really carve out a niche for themselves in the mortgage market," he said.Johnson explained that credit unions benefited not only from continuing to make mortgage loans but also by sticking to their historically sound underwriting while remaining consumer friendly. "Credit unions have long been known for using sound underwriting procedures for loans as well as for working with consumers to resolve challenges," he said. "Those qualities really came to the fore now."He also pointed out that a lot of credit unions were marketing their mortgage loan options more aggressively, making sure that different parts of the real estate market-such as home builders and Realtors-know that credit unions offer mortgages and can be relied up to help their buyers find the loans they need.These sorts of institutional changes are part of the reason Johnson expected credit unions to retain and grow their mortgage lending role rather than it retreating when the downturn eventually comes to an end.NAFCU Chief Economist Tun Wai agreed with many of Johnson's observations, noting that NAFCU has long taken the position that the economic downturn provided CUs with opportunities to grow market share as well as economic challenges.Credit unions originated a record number of mortgages, in part, because the real estate market in various parts of the country has begun to improve or at least has stopped sliding so quickly, Wai explained."Credit unions have benefited, not just from being the only ones lending in some of their markets, but because they have been ready to take a mortgage role," he said. "I believe that role will continue into the future so long as credit unions keep on being able to sell their loans."CUNA Chief Economist Bill Hampel agreed, noting that the steady increase in mortgage activity has been matched with changes in the way credit unions conduct their mortgage lending, particularly increasing the percentage of the mortgage loans they sell.Hampel explained that, historically, credit unions made more mortgage loans for their own portfolios, only selling between 25% and 35% of them each year. This fell to 25%, the low end of the range, in 2008 when the secondary market for mortgages went through such turmoil.But since the beginning of 2009, Hampel said credit unions have sold 55% of their first mortgages, a percentage higher than he has ever seen before. Hampel attributed the sales both to having a healthier secondary mortgage market as well as the increased risk the prevailing low interest rates carry.He also speculated that the economic downturn offered credit unions opportunities to move into the mortgage business that they may not have had before. "When the severely sliding economy turned many traditional economic relationships on their heads," Hampel said, "continuing businesses still needed to find partners with whom they could work and when mortgage brokers largely got out of the business in many markets, credit unions were ready to lend."–[email protected]