Mortgage Rates Hit Record Lows, CUs' Mortgage Portfolios Hit Record Highs

MADISON, Wis. – The end of 2003 is witnessing the curtain call on 30-year low mortgage rates that continued through the middle of the third quarter when they started to inch up. But not before credit unions managed to stow away a record number of mortgage originations and refinances. According to CUNA Mutual, as of Sept. 30, 2003, first mortgage originations for credit unions with $10 million or more in assets were over $29 billion – 67% above the June YTD level. At almost $73 billion, first mortgage origination results YTD were 17% above the full year 2002 results. In another illustration of the robustness of the first mortgage market in 2003, the average loan size for these credit unions increased 4.5% since 2002 to $122,500, said CUNA Mutual, with more than 593,000 loans originated through September. That’s up, said CMG, 70,000 or 13.4% from the previous record set in all of 2002. But just as credit unions originated more first mortgages, they also sold more on the secondary market. According to CUNA Mutual Group, as of Sept. 30, 2003, CUs had sold $31 billion in first mortgage loans or 43% of their originations. This compares to $25 billion of their loans sold in 2002 or 40% of originations. Through September, total credit union first mortgage loans outstanding to members equaled $120 billion or 31% of all credit union loans. That figure, said CMG, is up 18% over the past year. At press time, rates on 30-year fixed mortgages were around 6%, and even though those were higher than the rates in the low 5% range that consumers were accustomed to seeing, “that’s still a strong rate,” said Dan Rotert, svp, chief operating officer for CUNA Mutual Mortgage. “Anything below 6% fed the feeding frenzy,” he said. Most economists agreed the record low rates and high origination volumes couldn’t go on indefinitely, and it was just a matter of time before rates began to revert upwards – albeit slowly. While Rotert counts himself among those who expected this, he said he did not expect mortgage volume to be pulled back as “significantly” as it has. He predicted there will be a 65-70% reduction in origination volume for the fourth quarter 2003. That reduction, he said, will be fueled by the market’s saturation of mortgages and “serial refinancings” and the economic condition of the U.S. Looking ahead to 2004, he expects 30-year fixed rates to stay in the 6-6.5% range and for originations to decline to 50% or less of the previous three quarters. “The fourth quarter of the year is typically the worst for mortgages,” said Rotert. “Activity picks up again in the spring. I hope as the national economy recovers, there will be an expanded business recovery that puts more money in to people’s pockets and induces people to relocate. That will translate in to selling and buying homes.” -