Credit unions are holding approximately half of their residential mortgages in their portfolios, according to new data released by the Credit Union National Association (CUNA).
According to CUNA, credit unions have become more active as residential lenders; the percentage of originations sold by credit unions has doubled from 2007 to 2010. However, CUNA warns that credit unions that hold on to their mortgages may face problems in the near future.
‘Interest rates won't go up any time soon, but at some point they surely will,’ says Mike Schenk, CUNA vice president of economics and statistics. ‘That shows longer-term assets are growing because credit unions are holding more mortgages on their books and suggests credit unions have more interest-rate risk, so that you get liability sensitivity as liability costs rise faster than asset yields. This can very negatively affect earnings and, in some cases, capital.’
Schenk adds that credit unions pursuing the home loan market need to place a greater focus on securitization. ‘Credit unions should be writing loans that are up to secondary market standards so they can be sold if they need to be sold,’ he says.