“There's no end in sight,” Edward Pinto, co-director of AEI's International Center on Housing Risk, said. “It's going to be very difficult for the large banks to retrieve that business. All of that business … has been picked up by the non-banks.”

And the banks may not want the business back, Whalen said.

“The fact is that the cost of capital and compliance has convinced many bankers that making home loans to American families is not worth the risk,” he said.

Despite the growth of credit union mortgage business, mortgage seekers are not necessarily flocking to credit unions in droves. At the same time, some analysts warned if lenders – including credit unions – are not careful, the speedy approvals that many non-traditional service providers offer could cause another financial meltdown.

Quicken Loans is the second largest residential mortgage lender and servicer, just behind Wells Fargo Bank, according to Whalen. Quicken recently launched Rocket Mortgage, a service that promises an approval to buy a home or refinance in minutes.

For many, the eight-minute approval conjured up memories of the housing crisis and its accompanying risky lending when a Rocket Mortgage ad aired on TV during the Super Bowl.

New York Times economics columnist Neil Irwin wrote that to viewers, the ad was the most disturbing commercial presented during the championship game.

“The ad raises profound, and problematic, questions of what the United States' growth strategy should look like, even if the intent was only to get people to use a mortgage app,” he wrote.

Joseph Wiley, director of compliance and underwriting at OwnersChoice, added, “The Rocket mortgages rally can be a game changer.”

OwnersChoice is a New York City-based company that uses technology to help ease the mortgage process for credit unions in 10 states along the east coast.

“It is so ripe for this type of disruption,” Jeff Schood, co-founder and president of Intuvo, a Scotts Valley, Calif.-based service that works with credit unions to design lending strategies and market them, as well as automate mortgage services. “There are a lot of disruptors in this space.”

Whalen said services that offer quick approvals are filling the gap created by the Dodd-Frank Act and other regulatory pressures.

“Since the financial crisis in 2008 and the passage of the Dodd-Frank Wall Street Reform law two years later, the shape of the banking industry has changed rather dramatically,” he said. “Higher capital requirements, new laws and regulations focused on consumer credit, restrictions on principal investing activities and an increasingly hostile legal environment have combined to reduce the willingness and ability of banks to take risk in many markets and asset classes.”

He added, “Simply stated, the big banks are not interested in making a mortgage loan that has any likelihood of default. Today, more home loans are made by non-banks than banks.”

Despite the regulatory risks and stiff competition from online lenders, analysts said credit unions are well-positioned as mortgage lenders and should increase their efforts to attract borrowers.

Whalen said although some banks don't want mortgage business, both banks and credit unions have an advantage over non-traditional lenders. He explained more than half of the profit a bank or credit union earns from servicing a mortgage is from the float on interest payments, taxes and insurance. Non-traditional lenders do not have access to that income.

“This is an opportunity for the credit unions, but they have to be careful,” Mike Moebs, an economist with Moebs $ervices, a Lake Forest, Ill.-based economic research firm, said.

Wiley agreed, stating, “I think credit unions are in a great position to pick up some business.”

He added that the key, however, is to ensure credit union members know the institution offers mortgages that can be easily processed and approved – particularly in the face of Quicken Loans, which has bombarded consumers with ads.

“Credit unions now have the same menu of services as the larger banks do,” Wiley said. “The only challenge for credit unions is to make their members aware of it – make sure the member thinks of them first. They have so much on their plates.”

Pinto said credit unions' niches are with people who want more than an eight-minute relationship with a lender. He said credit unions should excel at portfolio lending, in which the credit union holds the mortgage and services it, rather than immediately selling it in the secondary market.

Wiley agreed, adding that some mortgage applicants still need the kind of hand-holding that their credit unions can offer.

“There are still lot of first-time home buyers who need counseling,” Wiley said.

Credit unions should not work alone, Moebs said. Instead, they should seek partners, such as investment banks, to handle securitization and assume part of the risk.

“Credit unions have to learn that they just can't do this,” Moebs said, adding that they should take advantage of expertise that exists elsewhere. “If that is done, the door is wide open for credit unions.”

To fully take advantage of the opportunity, credit unions also must consider a mortgage an opportunity to offer other services to members who initially seek a home loan only, according to Moebs.

Finally, credit unions must design processes that ensure they will not run into the regulatory hazards of the past, according to Moebs.

“We are going to be so squeaky clean that [we're] going to be the model for this,” he said.

Schood agreed that credit unions simply do not have departments that can handle the complexity of the entire mortgage process. Schood said services such as Intuvo's can offer credit unions the help they need with regulatory requirements.

Used correctly, new technology can offer credit union members services that online lenders such as Quicken Loans cannot, according to Schood.

“Credit unions [can] totally focus on that long-term relationship,” Schood said. “The Quicken Loan goal is to get them in and out as quickly as possible. The key is to use the technology to build the relationship rather than using the technology to replace the relationship.”