The appetite for credit unions to offer mortgage loans appears to be greater than other financial institutions, according to new TransUnion research. Credit unions' share of all mortgage originations has increased from 7% in Q1 2013 to 11% in Q1 2015.
The research was corroborated by a new survey of 90 credit union executives, with nearly six in 10 respondents stating the number of mortgage originations provided to their members has grown over the past two years. The survey and data were released this week at TransUnion's annual credit union seminar in Las Vegas, which includes participants from several leading credit unions located throughout the country. "Mortgage originations had declined substantially across the board in the last few years; however, the decline had been less dramatic for credit unions," said Nidhi Verma, director of research and consulting in TransUnion's financial services business unit. "In the last year alone, it appears significantly more credit union executives are seeing growth in this area. Credit unions are becoming bigger players in the mortgage loan market, something that may serve them well in the future as the housing market continues to recover. While TransUnion data show that credit union mortgage originations decreased 24% between 2012 and 2014, originations have actually increased 35% in the past year (Q1 2014 to Q1 2015). The rest of the market experienced a 48% drop between 2012 and 2014 and only experienced 15% growth in the past year (Q1 2014 to Q1 2015). TransUnion also found that credit unions experienced 25% growth in non-prime mortgage originations in Q1 2015 while the rest of the industry grew at 4%. "As the U.S. economy continues to recover, non-prime mortgage originations are growing for both credit unions and the rest of the industry," said Verma. "Historically, credit unions have seen lower delinquency rates than the rest of the industry, and their focus on membership expansion makes them well-positioned to take advantage of this growth." Auto Loans Still No. 1 TransUnion's survey also revealed that auto loans rank at the top of the list for credit union executives in terms of loan growth, focus and opportunity over the next 12 months. Auto loans were ranked No. 1 by 48% of credit union executives and in the Top 3 (of 12 loan categories) by 81% of respondents. "Auto loans have proven to be one of the key growth opportunities for credit union executives in the past and should continue to do so in the future," said Verma. "Auto loans are especially appealing because of the high demand for both new and used vehicles, as well as continued low delinquency rates." From Q1 2014 to Q1 2015, TransUnion reported a 7.4% increase in new auto loans issued by credit unions, while the rest of the industry saw a 2.1% increase in the same timeframe. Subprime constituted 12.5% of all new loan originations in Q1 2015 for credit unions. This was similar to the 13.1% subprime share of originations in Q1 2014. "Credit unions continue to be relatively conservative compared to the rest of the industry with approximately half the size of the subprime auto lending market," said Verma. "Credit union delinquency rates are half the rate of the rest of the industry, which is a reflection of how credit unions manage risk distribution in this market." TransUnion also found that the duration of auto loans is lengthening. In Q1 2010, 32% of credit union auto loans were originated with duration of more than 60 months. By Q1 2015, that percentage had risen to 47%. Approximately 39% of survey respondents said that more than half of their auto loan originations are 60 months or greater in length. "These data points clearly show that greater loan lengths are one of the drivers of growth in the auto market," said Verma. "In the current low interest rate environment, longer loan durations allow consumers to buy new or used cars with lower monthly payments that fit within their budget. The increase in loan durations shows lenders are meeting those consumer needs."