Mortgage lending surge continues, auto lending braces for a solid year: Callahan reports

WASHINGTON – Real estate lending continues to proliferate as some credit unions explore options on how to apply the brakes to the demand, according to Callahan & Associates, Inc. The firm held its latest Trend Watch conference call on June 25 with more than 25 credit union executives and vendors listening in and offering feedback to Callahan’s recently released indirect lending study. Chip Filson, president of Callahan culled data from a survey of 1,583 credit unions over the first quarter of 2001 and found that the real estate lending pipeline continues to be full, indirect auto lending is becoming a viable segment of the market share and “e-members” are a force to be reckoned with. Filson said $6 billion was invested in first mortgages last year, up between 60 and 65% over the previous year. Similarly, the secondary market saw $24 billion invested compared to $716 million in 1999. “We heard from one credit union that said they would have to raise rates to shut off the demand because their real estate pipeline is full,” Filson noted. Most credit unions “have not been aggressive enough in lowering rates to slow down share growth,” the survey revealed. Indeed, the first quarter revealed the highest rate of share growth at 68% since Callahan first started collecting such data in 1994. Compared to the same quarter in 2000, that rate was 13%. Still the liquidity surplus has not deteriorated credit quality while some large banks such as Bank One and First Union recently took massive chargeoffs. “Everyone has heard about the layoffs with the dot-coms, but the industry that’s hurting the most is manufacturing,” Filson said. Callahan also surveyed 292 credit unions to get perspective on auto lending practices. Indirect lending with a $1.6 trillion revenue market, continues to be an area to nurture, said Ray Springsteen, Callahan’s vice president of business development. Nearly $122 billion in outstanding auto loans exist with credit unions. Fifteen percent of members have their auto loans through credit unions, a number that has been on the rise since 1995, Springsteen said. Of the credit unions that offered indirect lending programs, 52% have set up their own in-house outfits, 30% aligned with a credit union service organization and 20% worked with a non-credit union company. Those with programs tended to be community- chartered credit unions. Among some of the other auto lending trends noted was the continuing demise of leasing programs with such major players as GE Capital withdrawing from the market, Filson said. “When I was a regulator 20 years ago, it was not uncommon for me to hear from a credit union that would refuse to finance a (dealership) loan if they felt the member was getting a bad deal,” Filson recalled. “Then, I would hear from the dealership about the credit union interfering. This is still a factor with some credit unions just not wanting to get involved with auto lending.” Meanwhile, e-members are continuing to be an important demographic, said Scott Patterson, Callahan’s e-commerce manager. Callahan surveyed 22 credit unions including Navy Federal Credit Union and Wescom Credit Union on member use with online services. The survey revealed that the average number of hours members spend online per week is between 6 and 15 hours, with many of them having access speed of 56k or higher. Home banking continues to be the main priority with many credit unions. The right partnerships with vendors who offer account aggregation services, for instance, also remains a vital link to bringing online offerings to members. Still, members worry about privacy and like quick responses to email on credit union sites, the survey revealed. -