BLOG VIEW: Go, Credit Unions!

Three cheers and a tiger for the credit unions! This slice of the financial services world is proving its critics wrong with impressive statistics that demand attention.

The Credit Union National Association (CUNA) just released some statistics that confirm how their industry's conservative approach to mortgage lending is paying off. According to CUNA, credit unions generated $535.6 billion in loans during August 2007, with half of those funds going into residential lending. And in all but one category, the level of lending either increased or remained steady in comparison to August 2006's data.

Here's the breakdown: Fixed-rate first mortgages originated by credit unions constituted 22.3% of the industry's total lending during August 2007, up from 20.4% in August 2006. Adjustable-rate mortgages made up 11.4% of credit union loans in August 2007; they were 11.8% in the same period last year. Furthermore, credit union-originated second mortgages comprised 10.1% of the industry's loans in August 2007, up from 9% in August 2006.

The only housing-related product to show a drop were home equity lines: They represented 6.9% of August's credit unions loans, down from 7.7% in the same month last year. But when you consider the state of the housing market, is it any surprise that home equity is less than robust?

CUNA's vice president of economics and statistics, Mike Schenk, saw these numbers as a vindication for his industry. "The August monthly estimates are sending a strong, clear message that things have changed," says Schenk, who was quoted in CUNA's in-house News Now publication.

Why is this a vindication? Think back a few years when the housing market was starting to heat up – where were the credit unions? Industry experts couldn't be bothered with those institutions. After all, credit unions weren't indulging in subprime lending or the exotic mortgages that were the rage.

The credit unions' cautious approach wasn't widely appreciated: The U.S. Government Accounting Office chided the industry last December for a perceived lack of attention to low- and moderate-income borrowers while real estate agents steered business away from them.

"Realtors want to work with a lender who takes the good paper, but will also take the more challenged one," says Bob Dorsa, president of the American Credit Union Mortgage Association.

Today, however, things are completely different. The institutions that recklessly pursued B- and C-paper borrowers have either suffered mightily for their actions or have gone out of business. And the convulsions have spread far beyond the subprime sector, roiling credit markets across the globe and shaking the financial giants with a mighty whack.

But the credit unions? Like the Energizer Bunny, they keep going and going. At a time when other mortgage lenders are posting losses, this little industry is watching its mortgage originations rise.

Hey, credit unions: More power to ya! Maybe you can teach the rest of the industry a much-needed lesson in fiscal conservatism.

Phil Hall, Secondary Marketing Executive


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