Credit unions achieved two major milestones in residential mortgage lending in 2012. The question now is whether they can maintain and build on those achievements.

Collectively, credit unions originated more than $100 billion in loans last year for the first time. Indeed, they blew past that number, originating $124.1 billion in total loans.

Mortgage volume jumped 50% last year, well above the industry growth rate of 39%. That enabled them to grow their collective market share to a record 7.1%.

"We've become almost relevant," jokes Bob Dorsa, president of the American Credit Union Mortgage Association.

Credit unions' share of the mortgage originations market has crept up steadily since the mortgage bubble burst, from 2.6% in 2007 to 6.5% in 2011. In the 10 years before that, however, their share averaged about 2% a year.

As impressive as these recent results are, credit unions still have a long way to go. Their 7% market share still looks puny, especially compared to that of industry leader Wells Fargo, whose total market share last year totaled 28% all by itself.

Credit unions have been able to increase their share thanks to their inherent advantages over their commercial bank counterparts. Their tax-exempt status lets them offer lower-cost loans to consumers than banks can. More recently, credit unions have benefited from the consumer backlash against the commercial banking industry following the global financial crisis and the ensuing bank bailout.

"Borrowers have become frustrated and disillusioned with the big banks and their treatment of customers. As a result, more borrowers are looking for alternatives when financing their homes, and credit unions meet that need," says Richard Whitman, vice president of residential lending at Texas Trust Credit Union in Mansfield, Texas.

But credit union officials seem to understand that a lot more can and needs to be done.

Anita Domondon, vice president of mortgage loan administration at Meriwest Credit Union in San Jose, Calif., says there has been a "big paradigm shift" that has resulted in increased market share. But credit unions still need to change several long-held perceptions among consumers. Chief among them: Many people, including many members themselves, are not even aware that credit unions make mortgages.

But George Hofheimer, chief research and innovation officer at the Filene Research Center, a credit union think tank in Madison, Wis., notes that some credit unions do have large market shares in their individual local areas. For example, he notes, UW Credit Union, the credit union for the University of Wisconsin, is the largest mortgage lender in Dane County.

Dorsa says the real test will come when the market shifts from a refinance-heavy one to a more purchase-driven market. That could prove to be a challenge for some credit unions. He notes that many real estate agents who are members of credit unions themselves don't recommend their clients to them.

"We’re still a long way away from eliminating the perception that credit unions do not have expertise in mortgage lending," Domondon says. "There is anecdotal evidence that real estate agents continue to steer their clients away from applying for a mortgage at a credit union."

However, she says, credit unions are "making headway" in changing that perception. "In cases where agents have to deal with a credit union lender, they are pleasantly surprised and walk away from the transaction with a different perspective. They discover that credit unions can be a good lender partner, with their own funds to lend, make decisions in-house, and are local."

"Credit unions can continue to capture market share by offering competitive products with higher levels of service, faster turn times, lower rates and lower fees," Whitman says. "Credit unions need to look closely at their product offerings to ensure that they are competitive in their respective markets. There is also room for credit unions to be more proactive in their marketing related to mortgage lending."

Despite the challenges, Whitman is "certain" that credit unions will continue to grow their mortgage loans. "Borrowers want a relationship with their mortgage lender. They don't want to be just a number. Credit unions deliver great service and competitive rates, which is what every borrower wants."

Domondon also notes that many credit unions have discovered the secondary market and "find that they can stretch their lending dollars by selling loans to the agencies and yet retain the relationship with their members. They can make more loans and not load up their balance sheet in real estate."

George Yacik has been covering the residential mortgage business for more than 20 years and writes frequently for industry publications. He can be reached at