PenFed More Than Doubles 4Q Mortgage Originations

PenFed Credit Union continued to set internal records in the fourth quarter, with growth from autos to mortgages.

Data supplied by the nation’s third-largest credit union shows its residential mortgages more than doubled from about $8.1 billion in 2020 to $18.9 billion in 2021. For the three months ending Dec. 31, PenFed said it originated $6.3 billion in mortgages, up from $2.4 billion a year earlier and $5.4 billion in the third quarter.

By contrast, the Mortgage Bankers Association estimates total originations last year fell 3%, while fourth-quarter originations fell 34% from their peak in 2020’s fourth quarter. This year, MBA is forecasting a 35% drop in originations.

PenFed CFO Jill Streit said Wednesday that this year will be tougher for mortgages. Originations won’t be more than doubling as they did last year, but she still expects they will rise by a “double-digit” percentage increase.

“We still believe we have a lot of opportunity to serve our members,” Streit said. “There are still a significant number of members who aren’t coming back to us for their mortgage needs.

“Despite the headwinds against our volume, we are very optimistic in our ability to increase our market share,” she said.

Growth will get a bump from home equity lines of credit.

With the dearth of housing inventory, some households that were considering a move for a bigger house, or one that better fits their needs, are considering renovating their current home and financing with a home equity loan.

“We are starting to see a change in consumer behavior around our HELOCs,” she said.

Streit also expects further growth from consumer loans, which includes auto loans, credit cards, personal loans and student loans. She said consumer borrowing will return to a more normal “post-Covid way of life” this year.

PenFed reported it produced $11.7 billion in consumer loans in 2021, up 39% from the $8.4 billion in consumer loans it reported for 2020. About $3.3 billion of the originations were in 2021’s fourth quarter.

Auto originations were just under $4 billion last year. “We had a strong appetite for autos in 2021, and we’re expecting that increase to continue in 2022,” Streit said. “We see a continued demand by consumers for auto loans, both in the direct and refinance markets, new and used.”

Streit expects rising interest rates this year will hurt PenFed and other credit unions most directly by reducing the number of mortgage refinancings.

Streit said PenFed will be buffered to some extent because it has a lower dependence on refinances: They accounted for about half of mortgage originations last year, while the Mortgage Bankers Association found refinances accounted for close to 60% of the value and number of transactions for all lenders.

But MBA forecasts refinances will drop 63% in value this year, and Streit said that kind of drop will hurt at PenFed even if lessened by its lower exposure.

On the other hand, Streit said higher interest rates will relieve PenFed and other credit unions from the margin compression that occur as rates approach zero.

Credit union net interest margins fell from a peak of 3.19% in 2019’s fourth quarter to a low of 2.57% in the first half of 2021. They rose slightly in the third quarter. Streit said she expects further improvement this year.

PenFed also reported:

• 2.4 million members in December 2021, up 20% from about 2.2 million a year earlier.
• Assets reached $32.5 billion as of Dec. 31, up from $26.7 billion at the end of 2020.
• Its total loan portfolio ended the year at $23.8 billion, up 25% from $19.0 billion a year earlier.
• Sales of $12.2 billion of loans into the secondary market in 2021, with more than half sold to other credit unions. In 2020, PenFed sold and participated $5.3 billion worth of loans to other credit unions.