Credit unions to surpass $100 billion in mortgage lending

December 14, 2012 at 10:11 am

The New York Times reports of a milestone for U.S. credit unions. For the first time, credit unions in the U.S. will surpass $100 billion in mortgage loan originations, and much of this is due to recent growth and interest in credit unions.

Bob Dorsa, the president of the American Credit Union Mortgage Association says, “We’d be remiss if we didn’t give a shout-out to the major banks for being annoying to consumers and forcing people to seek out other alternatives.” His tongue-in-cheek comment is based on a real sense of frustration among bank customers over fee increases and a lack of accountability to customers. As an alternative, credit unions provide almost all of the same personal and business banking services, but at lower rates and with a greater focus on customer service.

In regard to mortgage loans, credit unions were able to largely stay afloat during the fiscal crisis. Credit unions mostly stayed out of subprime mortgage lending, and they held onto the mortgage loans they did make to service them in-house. Another NY Times article from last summer explains that as a result:

when the financial crisis halted Wall Street mortgage securitization — the system in which investment banks sliced and diced loans into securities — credit unions weren’t as affected as others. They held the loans in their own portfolios rather than sell them, and had been doing so for years. For instance, at Melrose [credit union in Queens, NY], Mr. Nemeroff said,  “because part of our policy is to maintain a solid financial relationship with our members, we retain the majority of our portfolio.”

As we’ve blogged about before, the Occupy movement and the Bank Transfer Day of 2011 sparked an interest in seeking out alternatives to banks. One Bank Transfer Day itself, 664,000 people became new members of credit unions across the nation. The Credit Union National Association reported that the year ending July 2012 saw 2.2 million new credit union members.

Although traditional banks play a role in our economy and in the financial services sector, they may not be a good fit for all customers. And although credit unions have been around for a long time, there has not necessarily been an awareness about them and the services that they provide. A robust financial sector should have different kinds of institutions that can meet varying needs.  It is important that those who are seeking an alternative can access their local credit unions. For now it is encouraging that the growing interest in credit unions is facilitating that connection.

Entry filed under: Banking, Banks, Credit Unions, Economic Development, Economy. Tags: , , , .

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