CUs Share How Housing Market Is Impacting First-Time Buyers

Even as mortgage originations remain near record levels for credit unions, many of their members are struggling to buy homes in a highly competitive market.

A TransUnion report released Wednesday showed originations in the second quarter were up 78.1% from 2020’s second quarter but were 3.4% lower than 2021’s first quarter.

Callahan & Associates reported Aug. 11 that credit unions originated $80.9 billion in first mortgages in the second quarter, up 9.7% from a year earlier and up 2.8% from the first quarter.

Joe Mellman, SVP and mortgage business leader at TransUnion, said low interest rates continues to support mortgage originations, especially refinances.

“While new home purchase activity is still robust, rising home prices are potentially pricing some borrowers out of the housing market,” Mellman said.

State Employees’ Credit Union of Raleigh, N.C. ($49.9 billion, 2.6 million members) ranked fourth among credit unions with $4.5 billion in first mortgage originations last year. First half originations rose 9.8% to $2.2 billion.

Mark Coburn, SVP of lending development, said the North Carolina housing market is hot, not only the large metro areas of Charlotte, Raleigh, Greensboro and Winston-Salem, but also in the mountains and along the coast.

In Raleigh or other hot markets, buyers are offering $20,000 to $40,000 more than the list price, Coburn said. “It’s the standard now that people are in a bidding war above the asking price.”

Coburn said rising home prices could be compounded by eventually higher interest rates to keep more people out of buying a home.

“The more expensive the home, the more people are on the margin. Even if they have good credit, they won’t qualify. They get priced out,” Coburn said.

At Lake Michigan Credit Union of Grand Rapids, Mich. ($10.4 billion in assets, 413,178 members), mortgage applications were arriving at a rate of about 100 per day early this month, down from a peak of about 140 per day last year.

Chief Lending Officer Eric Burgoon said refinances have waned with slightly higher rates and a dwindling pool of people ripe for refinancing. Still, there were about 40% to 45% of originations in August, compared with a historical average of 20% to 25%.

Originations of purchase mortgages are up about 30% over last year. Yet, he said mortgage volume is constrained by the scarcity of homes for sale. Typical inventory is four to six months, but in many of its markets inventory is one to 1.5 months.

“Usually the challenge is to sell your existing house before you can buy a new one,” Burgoon said. “Now you want to buy a house, but you’re afraid to sell your house because it will sell too fast and you have nowhere to live. It’s almost a reverse phenomenon because the inventory is so tight, and so short.”

Lake Michigan CU was the third-largest originator of first mortgages with $6 billion last year. In the first half of 2021, it originated $3.2 billion, up 17.4% from a year earlier.

Star One Credit Union of Sunnyvale, Calif. ($10.6 billion in assets, 114,914 members) was the ninth-largest credit union for first mortgages last year with originations of $3 billion. Originations in the first half of 2021 were $1.9 billion, up 93.1%.

Victoria L. Tabler, vice president of real estate lending, said the Silicon Valley-area credit union decided five years ago to focus on purchase lending. It has six underwriters, with three of them now working only on purchases.

“Early on we realized that in order to build long-term relationships with the members, we need to help them get into the home, and the focus should be on purchase transactions,” Tabler said.

“We’re a portfolio lender,” she said. “We’re not chasing every loan, and selling it on the secondary market.”

It has also adopted a practice of assigning a loan officer as the single point of contact for every purchase loan. Star One has six underwriters, with three of them now working only on purchases.

“If we need to commit to stricter timelines, we can because there’s one person who has an understanding and control of the whole process,” she said.

The emphasis on purchase loans also helps shield the credit union from the booms and busts of the refinance market.

“With rates being lower, we still have pretty heavy refinance pipeline going there as well. It’s been interesting and tough,” Tabler said.