Report Finds Credit Unions Building Auto, Home Portfolios

New data shows credit unions built a larger share of the nation’s portfolio of car loans and first mortgages in the first quarter of 2022.

CUNA’s latest Monthly Credit Union Estimates showed total car loans stood at $425.8 billion on March 31, up 9.9% from a year earlier and up 3.8% from Dec. 31.

Credit union gains outpaced other lenders. The Fed’s G-19 Consumer Credit report released Friday showed that all lenders held $1.34 trillion in motor vehicle loans in March, up 7.6% from a year earlier and up 1.6% from the fourth quarter.

The same pattern held for first mortgages.

CUNA estimated that credit unions held $593.4 billion in first mortgages in March, up 11.8% from a year ago and up 2.1% from December.

The Mortgage Bankers Association’s April 13 estimates showed the balance of first mortgages at the end of March was $12.71 trillion, 7.9% higher than a year earlier and up 1.4% from Dec. 31.

That indicated credit unions held a 4.7% share of the national portfolio of first mortgages in March, which was slightly lower than their 4.8% share in the second half of 2020 when paydowns were highest, but continuing a pattern of improvement from shares that were 4.0% to 4.4% in 2018 and 2019.

Credit unions had 31.9% of auto loans as of March 31, up from 31.2% a year earlier and 31.2% three months earlier.

A share of balances speaks as much to CFO wizardry in balancing risk and consumer savvy in payoffs as it does to origination prowess. For example, credit unions have generally been selling a lower share of their mortgages since mid-2020, and some credit unions sell car loans.

But portfolio numbers are still important. Cars and first mortgages account for more than three quarters of the credit union movement’s portfolio. Auto loans made up 32% of credit union portfolios and first mortgages made up 45% of total loans in March.

And the gains by credit unions come at a time of challenges in both markets.

Cox Automotive said it expects about 1.2 million new cars were sold in April, down more than 20% from a year earlier as factories are unable to deliver enough cars to dealers to meet demand that remains strong, despite higher prices.

Meanwhile, it estimated retail sales of used cars fell 13% from March to April and 21% from a year earlier.

Charles Chesbrough, senior economist at Cox Automotive, said sales of certified pre-owned vehicles are down nearly 16% year to date and are on trend with the overall used-vehicle market, which is experiencing a weaker spring than expected. He said he expects “stronger sales activity in the second half of the year.”

Joel Kan, the MBA’s assistant vice president of economic and industry forecasting, said the 127-basis-point increase in mortgage rates over the past two months has halved refinance activity. Kan said the spring home buying season has had a slow start. Purchase mortgage applications for the week ending April 29 were up 5% from the previous week but down 11% from a year earlier.

“The purchase market remains challenged by low levels of housing inventory and rapid home-price gains, as well as the affordability hit from higher mortgage rates that are forcing prospective buyers to factor in higher monthly payments,” Kan said.

Credit card balances remained below pre-pandemic levels for both banks and credit unions. The Fed report showed credit unions lost ground to banks last month.

At credit unions, credit card balances grew 8.5% to $64.2 billion from a year ago, and rose 0.9% from the previous month, compared with average March drops of 0.1%.

Credit unions’ share was 6.2% in March, down from 6.3% in February and 6.5% in March 2021. Banks’ share was 90.7% in March, up from 90.6% in February and 89.7% in March 2021.

CUNA’s monthly report showed the nation’s 5,089 credit unions had 132.6 million members in March, up 3.4% from a year ago and up 0.2% from the previous month. It also showed:

• The 60-day-plus delinquency rate was 0.43% in March, compared with 0.45% a year earlier and 0.47% a month earlier.
• Assets were $2.15 trillion, up 8.4% from a year ago. From February to March, they rose 1.3%, compared with average February-to-March gains of 1.3% from 2016 to 2020.
• Savings were $1.88 trillion, up 9% from a year ago, and rose 1.8% from the previous month, compared with average March gains of 1.8%.
• Total loans grew 11.3% to $1.33 trillion from a year ago. They rose 1.6% from the previous month, compared with average gains of 0.7%.
• New car loans grew 1.6% from the previous month, compared with average gains of 0.5%.
• Used car loans grew 2.1% from the previous month, compared with average gains of 1%.
• First mortgages rose 1% from the previous month, compared with average gains of 1.9%.
• Second-lien mortgages grew 3.4% to $86.5 billion from a year ago, but fell -1.4% from the previous month, compared with average March drops of 0.4%.