Credit Union Loan Growth Resumes Pre-Pandemic Rate

Credit union loan balances have returned to the relatively weak growth rates that prevailed before the pandemic, according to a CUNA report released Tuesday.

However, CUNA data showed that first mortgages are the only major sector supporting the portfolio growth. A year ago, above average growth also came from credit cards and unsecured personal term loans.

CUNA’s Credit Union Monthly Estimates report showed total portfolios stood at $1.18 trillion as of Aug. 31, up 6.6% from a year earlier. Total loan grew 6.4% from August 2018 to August 2019, falling to a low of 6.1% for November, then rose to a high of 6.9% in March on the precipice of the pandemic.

Overall portfolio growth slowed after the World Health Organization declared COVID-19 a pandemic on March 11, but not so much. The lows were a familiar 6.4% in April and June. The highs were 6.6% for May and August.

What has changed is a sharp drop in personal lending and an even hotter housing market. And car lending, which was weakening before the pandemic, has continued downward. Total car loans grew 8.8% from August 2018 to August 2019, but only 2.5% from August 2019 to August 2020.

A year ago, credit unions’ personal loan portfolios were growing nearly 9%, and credit card growth was about 7%.

As of July, personal loan growth had fallen below 3% and credit card portfolios had fallen nearly 6%. The Fed will release August data for credit cards late Wednesday.

Meanwhile, CUNA reported credit cards and personal loans in a combined “unsecured loans” category that had a balance of to $113.2 billion on Aug. 31, up 2.3%. A year earlier, from August 2018 to August 2019, unsecured loans rose 7.5% to $110.7 billion.

LendingTree reported Tuesday that interest rates “are among the lowest since the coronavirus crisis began” for personal loans offered to prospective borrowers on its platform during the week that ended Sept. 26 — “for all but subprime borrowers.”

“We did see a small dip in the number of consumers seeking these loans this week, but if rates continue to fall, it seems unlikely that consumer interest in personal loans will fall with them,” Matt Schulz, chief industry analyst for LendingTree, said.

First mortgage portfolios rose 12.3% to $509.4 billion as of Aug. 31. The year-ago comparisons actually spiked after the pandemic. The lows were 7% to 9% gains in the first two months of the year, rising to gains of 11% to nearly 14% from March to July.

CoreLogic’s Home Price Index released Tuesday showed prices for single-family homes in August were 5.6% higher than a year ago and 1% higher than in July.

However, it predicted price will rise only 0.2% from August to September and 0.2% from August 2020 to August 2021.

“Despite the continued pressures of the pandemic, consumer home-purchasing power has stayed strong as mortgage rates remain at record lows,” the report said. “Meanwhile, for-sale inventory has continued to dwindle, dropping 17% year over year in August, which created upward pressure on home price appreciation as buyers compete for the limited supply of homes.

“Home price growth is expected to slow as greater availability of new and existing homes are placed for sale in 2021 and elevated unemployment saps buyer demand.

Areas at high risk of falling prices include Las Vegas and Miami that have been hard hit by the collapse of the tourism market.

A related concern is loan quality. The Mortgage Bankers Association reported Monday that 3.4 million homeowners were in forbearance plans, representing 6.87% of nation’s mortgages as of Sept. 27, down from 6.81% a week earlier.

“As of the end of September, there continues to be a slow and steady decrease in the share of loans in forbearance,” MBA Chief Economist Mike Fratantoni said.

“The significant churn in the labor market now, more than six months into the pandemic, is still causing financial distress for millions of homeowners,” Fratantoni said. “As a result, more than 70% of loans in forbearance are now in an extension.”