Credit Union Mortgages Explode Out West

Credit unions in the eight western states that form the Census Bureau’s “Mountain division” have been growing at a brisk pace by building stronger teams, deploying better technologies and riding the wind of demographics at their backs.

The Mountain division’s population grew 11% from 2010 to 2018 — the fastest growth among the nine Census divisions. The area includes some of the nation’s fastest-growing metro areas, and some credit unions that are outpacing their home turfs.

Three of the top 10 first-mortgage producers in the second quarter came from the Mountain states:

• Idaho Central Credit Union of Chubbuck, Idaho ($4.5 billion in assets, 365,879 members as of June 30) ranked 6th with $500 million in first-mortgage originations in the three months ending June 30, up 58.1% from 2018’s second quarter.
• Mountain America Federal Credit Union of Salt Lake City ($9.1 billion in assets, 841,131 members) ranked 9th with $422.6 million, up 27%.
• Elevations Credit Union of Boulder, Colo. ($2.1 billion in assets, 140,184 members) ranked 10th with $397 million, up 11.1%.

Nationally, credit unions had less than 3% of the first-mortgage market in 2007, and their share has risen to about 8% this year. Some of that growth has come from credit unions like Idaho Central, Mountain America and Elevations.

Together, the three credit unions generated about 30% of the Mountain states’ first mortgages in the second quarter.

While first-mortgage originations among all NCUA-insured credit unions rose 7.4% to $41 billion for the three months that ended June 30, first mortgages for the three rose 31.1% to $1.3 billion.

The third quarter was even better as refinances continued to surge, and credit union lending officers said they expected comparisons with a year ago to remain positive through the first quarter, then turn downward as refinances fall.

The Census Bureau says most of the areas’ growth is from net migration, which some have said is coming from and retirees and young professional with mobile jobs seeking a places that are cheaper to live than some of pricey tech centers, such as the San Francisco Bay area. Behind them are movements of people seeking jobs in the service industries.

They’re coming to an area that generally came through the recession well.

The exceptions were Nevada and Arizona, where median home prices fell by more than half from the fall of 2007 to their depths in the wake of the Great Recession. Those prices have now nosed above their pre-recession peaks, according to ATTOM Data Solutions of Irvine, Calif.

The rest of the region has some of the same issues that the hottest housing markets, have but more in a slightly cooler Goldilocks range. Home inventories are tight and prices are rising; but employment is high and interest rates are low.

Utah, New Mexico and Montana escaped the crash in home prices during the Great Recession. ATTOM does not have sales data for Wyoming.

Utah, dominated by the Salt Lake City metro area, was not hit hard because its property values didn’t appreciate like some of the markets in Nevada, Arizona, California and Florida, said Amy Moser, VP of mortgage services for Mountain America FCU.

“People in the state of Utah realize we were lucky in that we didn’t see such dramatic impact. There were not a lot of foreclosures, short sales and people losing their homes right and left,” she said.

One reason is that lenders kept members from overextending on their home values.

“At the time they weren’t sure why we were telling them this is the value of the home,” she said. “I think they understand now, and appreciate it.”

Colorado’s median home prices were $220,000 in 2007’s third quarter, fell 22.7% by early 2009 and since then have risen 69.5% to $373,000.

At Elevations CU, real estate lending (including second liens and commercial loans) has risen an average of 89% per year since 2007. In 2018, it originated $1.3 billion in real estate loans, accounting for 92% of all originations.

Elevations CU has a strong, but mature market share in its home area around Boulder, said Elizabeth Million, VP of mortgage lending.

“Primarily, our growth is in outlying markets. So while our Boulder market is very much at the whim of the market as a whole, we have a steady overall growth in purchase loans through our expansion north into Fort Collins,” she said.

Idaho’s median home prices were $188,000 in 2007’s third quarter, fell 29.3% by mid-2011 and since then have risen 54.7% to $290,816.

Idaho Central CU has been growing with the trend. Its NCUA call report shows that Idaho Central originated $605.5 million in first mortgages in the three months ending Sept. 30, up 55% from 2018′s third quarter.

“The third quarter was our highest quarter this year both in number and value,” said Amanda Myers, VP of mortgage lending.

“October is lining up to be another record-breaking month for us. November and December will level off a little bit, but I would not be surprised if Q4 is our second-highest of the year based on what we’ve got in the pipeline right now,” she said.

Myers expects total first mortgages in the first quarter of 2020 to be higher than a year ago because rates will remain low, or maybe go a tad lower. For the year, however, she expects the number and value of originations will be lower than 2019 because refinances will decline.

“On the purchase side, I think we’ll be up because we’ve hired some new mortgage officers who are starting to build their networks,” she said.

After the first quarter, the comparisons will worsen as the refinance tide ebbs. In 2019’s third quarter, 45% of loans were refinances. By March 2020, she expects refinances will have returned to a normal 30% of the mix.

One way the refinance boom might continue is if rates fall below 3.25%. That was the low point of the last refinance boom in the summer of 2016, and there are a lot of homeowners who refinanced at that rate back then and will only refinance again if the rate falls below that mark.

“This year, we never got to 3.25%. If in the next three months we were to get to 3.25% or less, that would trigger another boom,” Myers said.

Then again, some economists predict a significant slowdown or even a recession next year.

Idaho went through the Great Recession better than most parts of the country, she said.

“We’re optimistic, even if there is a recession, we’re going to be fine,” she said. “We love finding any member we can help. We think a recession creates some opportunity for us to help people through that hard time.”

The Great Recession, in fact, turned out to be a great opportunity for Idaho Central.

Myers joined Idaho Central Credit Union in 2005, and transferred to the mortgage department two years later just in time for Idaho Central’s entry into mortgage lending and the start of the Great Recession.

Idaho Central was strong, and decided that its long-term goal was to become the premiere financial provider to Idaho’s families. That meant it needed to provide a full ranges of services, and mortgage lending would be a key part.

Banks, on the other hand, after feeding a housing bubble with securities backed by flawed or fraudulent mortgages, were at the front end of a slide that would require massive federal intervention to keep America’s banking system afloat.

They were, in short, indisposed to mortgage lending.

This left Idaho Central with many mortgage applications from people who might normally go to banks.

The credit union had undertaken a project in 2007 to determine how to increase mortgage volume and provide better service to its members. The credit union then started a training program so a broader number of branch employees could be certified as mortgage originators.

Idaho Central started becoming the No. 1 mortgage originator in some counties about seven years ago, and reached the top statewide in 2016. It now generates about 11% of mortgages in Idaho, and in some counties its share is as high as 30%.

Meanwhile in Utah, Mountain America is the largest credit union mortgage lender, and among all types of lenders it is the seventh- or eighth-largest behind Quicken, Wells Fargo and others.

About three-quarters of Mountain America’s mortgages are originated in Utah. Most of the rest come from Idaho, Nevada, New Mexico and Arizona, where it also has branches.

While it also makes a few loans in Colorado, Wyoming and Oregon, its growth plans are focused on the states where it already has branches.

“We’re not really moving east, and we’re not going into the California market,” Moser said.

Since rates dropped, about 60% of Mountain America’s originations have been from refinances. By the end of the year, it expects refinances will be returning to a more normal 30% of the mix.

“We consider refinances the gravy in the mortgage market,” she said.

To reach more members in a market that will be growing more slowly or declining, Mountain America has been honing its technologies and processes.

Mountain America’s mortgage lending has been paperless from start to finish for more than four years. This year’s goal was to cut turn times by five days on every product. “We’ve been able to do that even with the increased volume,” Moser said.

Mountain America now averages 23 to 24 days to close a purchase loan, and 26 to 28 days for a refinance.

Next year it wants purchases under 20 days, and refinances close to that. It will also introduce artificial intelligence to underwriting.

“It will allow us to remove any stare and compare from documents,” she said. “The data will be looked at by machines with robot-learning instead of by underwriters, loan officers to make it a faster, smoother experience for the member.”