Credit unions ramping up mortgage lending

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Credit unions are increasing their mortgage lending, boosted by growing awareness and demand, increased lending staff, new regulations regarding counseling and highly competitive rates.

A report issued by TransUnion indicated credit unions provided 11 percent of U.S. mortgage originations for the first quarter of 2015, still a small portion, but a big jump from 7 percent a year ago.

The number of mortgages overall rose 15 percent year over year as of the first quarter, while it rocketed 35 percent for credit unions.

“There is a huge increase in awareness of credit unions in general. I believe more people decided to do business with credit unions,” said Michael Mattone, a spokesman for Manhattan-based Municipal Credit Union with four Long Island branches. “As that awareness increased, they’ve gone to credit unions they built trust with in the past couple of years.”

Other credit unions said they’re making mortgages a bigger part of their business, as they encroach on a territory long dominated by banks. Credit unions are revving up both auto loans and mortgages – with car loans sometimes leading to mortgages.

“There has been quite a bit of activity in mortgages,” said Elizabeth Mitacchione, Teachers Federal Credit Union’s vice president of mortgage services.

Low mortgage rates are fueling the increase in mortgages, as well as refinancing, for all lenders. And that’s lifting credit unions’ business.

“Since rates are so historically low, we’ve seen more people looking to buy a home than ever,” said Terri Rossi, sales manager for mortgage originations at Bethpage Federal Credit Union.” And I have been in the business for 20 years. The dollar goes so much further.”

In part, credit unions simply benefit along with other financial institutions from low rates. McLean, Va.-based Freddie Mac on Thursday said the 30-year fixed rate mortgage averaged 3.9 percent with 0.6 points on average, below 4 percent for the seventh consecutive week. The 15-year mortgage averaged 3.1 percent with 0.7 points down.

Freddie Mac Chief Economist Sean Becketti, in a written statement, said, “Housing markets have responded positively to low mortgage rates.”

Housing starts in July 2015 jumped to 782,000 units, up 12.8 percent from June and up 19 percent from last year, according to Freddie Mac.

But credit unions also may have benefited as banks cut back on mortgage lending following the 2008 meltdown. As banks stepped back, credit unions stepped up and customers followed.

“When the market crashed, a lot of banks changed their lending criteria almost overnight,” said Anie Akpe-Lewis, MCU’s vice president of mortgages. “Everybody didn’t fit into that mold.”

Many banks had been too eager to make mortgages, leading to a mortgage meltdown as defaults rose. That bad led banks to be more cautious and regulators to be more aggressive.

“They would allow any kind of credit profile,” Rossi said. “It was like the wild, wild west. There was no-income check.”

Banks weren’t the only ones to see defaults rise as the economy tumbled. But credit unions, Akpe-Lewis said, weren’t hit as hard.

“Credit unions were impacted, but they didn’t change their criteria,” she said. “We tweaked things. But we were already doing the traditional method. When others didn’t do that, they lost.”

Municipal Credit Union – with $2.2 billion in assets and 375,000 members – hired to build its mortgage business.

MCU added a half-dozen more mortgage staff over the past two years, growing its mortgage lending operations to 38 people.

Meanwhile, MCU’s number of mortgages grew from 86 in the first quarter of 2014 to 136 in the first quarter of this year.

Credit unions also may be growing mortgages, by being flexible, not ignoring credit scores, but looking at factors that can influence a score.

“Most people will look at a loan and say, ‘If you don’t fit into this credit score, we can’t do the loan.’ We don’t ignore the score. We pay attention to compensating factors,” Akpe-Lewis said, noting MCU may seek 20 percent rather than 10 percent down. “You take more risk, but we require more of a down payment.”

While credit unions began marketing mortgage operations, other changes may have favored their lending.

Lenders must offer homebuyer counseling on certain mortgage products; credit unions often had long provided or referred prospective buyers for counseling.

“We were already doing those things,” Akpe-Lewis said. “The industry was catching up to what we were doing.”

MCU works with the Manhattan-based Mortgage Coalition, which has Long Island offices, to counsel homebuyers, informing them of rules and giving tips.

“We talk about what’s happening in the mortgage market,” Akpe-Lewis said. “We talk about credit reports and products, who you need on your team to get a mortgage.”

More lending could mean more risk. But MCU’s delinquency rate is about $4 million, or less than 1 percent on $640 million in mortgages.

Even as awareness grows, most borrowers still look toward banks for mortgages. But that has begun to change as credit unions get the word out.

“People see advertisements by big banks, showing mortgage products,” Akpe-Lewis said. “With credit unions, even for us sometimes, people say, ‘I didn’t realize you had a mortgage department.’ We just needed to be more involved with the community, to let them know credit unions aren’t just for savings on your credit card and auto loan. It’s also for your mortgage.”

Are credit unions seeking to compete with banks for every mortgage? That’s probably not in the cards.

“We market,” Akpe-Lewis said. “But to say we compete with them is hard. They can offer on a grander scale.”