CUs in the South Take the Lead in Real Estate Loans

A CU Times analysis of NCUA data showed the South emerged in the first quarter as the largest credit union producer of residential real estate loans, eclipsing the West.

Credit unions in the South, defined by the Census Bureau as stretching from Texas to Virginia, originated $26.3 billion in first mortgages, home equity lines of credit and other residential real estate loans in the three months ending March 31. That was up 20.5% from a year earlier.

The West, which had been leading in volume for years, originated $23.5 billion, down 11.8% from a year earlier and falling below volume for the South.

Originations fell 23.7% to $12.6 billion in the Midwest, while they rose 1.9% to $11 billion in the Northeast.

As is typical in the winter, originations fell in all four regions from the fourth quarter to the first quarter.

First mortgages accounted for $58.1 billion, or nearly 80%, of the residential lending in the first quarter.

For all lenders, first mortgages hit record levels in 2020 and 2021 as interest rates fell to record lows, igniting a refinance boom. Also, purchase loans rose with high demand and rising prices.

This year the refi boom burst as mortgage rates have risen to new highs. For the week ending June 17, the Mortgage Bankers Association reported Wednesday that the rate for a 30-year, fixed rate mortgage was 5.98% — the highest since November 2008 and the largest single-week increase since 2009.

Joel Kan, the MBA’s assistant vice president of economic and industry forecasting, said mortgage rates are now almost double what they were a year ago, leading to a 77% drop in refinance volume over the past 12 months.

“Purchase activity was still 10% lower than a year ago, as inventory shortages and higher mortgage rates are dampening demand,” Kan said. “The average loan size, at just over $420,000, is well below its $460,000 peak earlier this year and is potentially a sign that home price-growth is moderating.”

The MBA’s June 10 forecast showed total originations falling 40% this year and 6% next year.

The originations by area were weighted by the number of branches a credit union had in each state. This quarter’s report was revised to reflect changes in NCUA data. In the past, the reports showed first-mortgage originations, which included a small (but unreported) amount of commercial first liens. Starting in the first quarter, the NCUA reported residential and commercial originations separately.

However, data for residential real estate loans, including 2nd liens, is available for both the past and current NCUA reports.

Nationally, credit unions originated $73.3 billion in residential real estate loans in the first quarter, down 3.1% from a year earlier and down 11.2% from the previous quarter.

Originations by Census areas were:

Northeast

New England: $3.5 billion, down 12.8% from a year earlier and down 9.6% from the previous quarter.

Middle Atlantic: $7.5 billion, up 10.6% from a year earlier and down 3.3% from the previous quarter.

Midwest

East North Central: $8.5 billion, down 27.7% from a year earlier and down 25.9% from the previous quarter.

West North Central: $4.1 billion, down 13.5% from a year earlier and down 18.5% from the previous quarter.

South

South Atlantic: $15.8 billion, up 16.7% from a year earlier and down 10.7% from the previous quarter.

East South Central: $3.4 billion, up 33% from a year earlier and 42% from the previous quarter.

West South Central: $6.6 billion, up 20.4% from a year earlier and down 8.6% from the previous quarter.

West

Mountain: $7.8 billion, down 8.8% from a year earlier and down 14% from the previous quarter.

Pacific: $15.4 billion, down 14.1% from a year earlier and down 10.5% from the previous quarter.