Credit unions have always been a popular choice for home loans, but the past year saw even more impressive growth than usual. In a time when home sales were flat overall, according to the National Association of Realtors, and when the number of first-time homebuyers sat at its lowest point in over three decades, more consumers sought mortgages from credit unions than in the past. According to the CU Times, credit unions' share of first-time mortgages is now four times larger than in 2006.
That growth demonstrates the value that credit unions can present to borrowers. Unlike large traditional banks that adhere to overly strict lending requirements to limit risk in the aftermath of the financial crisis, credit unions are able to offer loans to less-qualified individuals. This is partially because credit unions can expend the energy to completely research members and become familiar with their financial situation. This allows them to confidently make loans that other organizations would deem too risky.
New regulations and the opportunity for refinancing
With new legislation from the Federal Housing Authority that provides lower insurance premiums for FHA-insured loans, many are expecting an increase in the number of first-time borrowers and homeowners. While that is likely to happen, and will probably benefit credit unions who have already demonstrated consistent growth among these demographics, the new legislation also represents an opportunity for credit unions to provide refinancing opportunities to their members who already have mortgages.
According to The Wall Street Journal, large banks are not as well-situated to take advantage of the potential for increased refinancing. Many of these organizations stepped away from FHA programs as they tried to cope with the penalties imposed after the financial crisis.
"In the new year, mortgage activity is likely to pick up."
With a 0.5 percent reduction in FHA home loan premiums expected, a considerable number of people could be convinced to refinance their loans. The most likely participants, according to The Journal, are those who procured their loans after 2013. This coincides with the era when credit unions experienced increased mortgage activity.
While auto loans to less-qualified buyers will probably continue to be the largest growth area for credit unions in the new year, mortgage activity is likely to pick up. That's due to the new regulations and the continuation of a trend that started in 2006. Credit union executives will want to advertise the favorable refinancing options that are available for their current members while they court new business.