For the past six years this market has been known for another gamble that went sour: housing.
Now there are finally signs that health is returning to the housing and mortgage markets.
The housing bubble that inflated quickly here between 2002 and 2006 and then burst suddenly like drawing a king, king, two in 21, is beginning to be a bit of history here. The days of no downpayment, speculators and, to a lesser extent, “strategic defaults,” are fading.
Out of this debacle has arisen an opportunity for credit unions, which historically have had a low penetration rate in the mortgage lending business. All 10 of the CUs that were interviewed by Credit Union Journal—ranging in asset size from $120-million Great Basin CU in Reno, Nev., to $7.9-billion The Golden 1 CU in Sacramento, Calif.— reported good to excellent production. All 10 debunked the commonly held notion that mortgages are difficult or impossible to find after underwriting standards tightened up.
The primary concerns for these CUs are managing interest rate risk and dealing with compliance issues.
Bob Dorsa, president of ACUMA, American Credit Union Mortgage Association, said the news for CUs is both good and bad. He noted credit unions are on pace to produce $100 billion in first mortgages in 2012, which will boost the CU industry’s market share to 7% or possibly 8%, potentially quadruple where it was during the recession. On the other hand, he said, that still means 92% of home owning members have their mortgages elsewhere.
“The improvement is a reflection of consumers’ tenacity to find credit unions,” he assessed, adding, “My criticism is credit unions still have not even turned on their promotional arms to market the availability of mortgages. Wells Fargo is up to 40% market share in mortgages, so banks are not going away. About 1,000 credit unions combine for 8% market share, and there are 4,000 credit unions that do not do anything.”
According to Dorsa, California and Nevada have made it through some bad times and now are seeing improving conditions. He pointed to the value of his own house, which, after ups and downs, now is worth what he paid for it 10 years ago.
“Nevada has had a stigma for being a foreclosure capital, but now there is a housing shortage,” he assessed. “Nevada will recover eventually, it may take some time, but certainly employment is a key. California is a larger state that is more diverse both economically and geographically so it probably will recover faster than Nevada, which is more concentrated.”
“Smart lending” is the way out of the problem, according to Dorsa. He said CUs cannot expect rates to be at “these ridiculous low levels” forever.
“The picture is optimistic,” he said. “The country has turned the corner on the recession and the recovery is coming. It might take a while, but the foundation of the credit union system is very strong. As long as we communicate to members the fact they are eligible for mortgages. Credit unions can talk about building relationships with Realtors and attending Chamber of Commerce meetings all day, but until they do it they won’t get more market share.”
Dorsa’s advice: start with Realtors who already are credit union members and let them be surrogates who educate other Realtors.
“Or small credit unions can join a mortgage CUSO or an aggregator. Just don’t say ‘no’ when a member calls and asks for a mortgage, say ‘yes.’ Credit unions really need to make a commitment to letting people know they are there,” he said. “We will get as much business as we want. Most of my members will attest their financial health is greatly enhanced by mortgage productivity.”