California credit unions took advantage of the Home Affordable Refinance Program and originated twice as many home loans in second quarter than the previous three months.

These smaller lenders wrote a collective $9.6 billion in mortgages, up from $4.6 billion at the beginning of the year. Like larger banks, credit unions were able to pick up some business from an expanded HARP, which allowed more underwater borrowers to refinance their Fannie Mae and Freddie Mac loans.

Many of the largest banks tied off new HARP to just the loans they service, and some borrowers exhausted with poorly managed government programs in the past even bypassed the largest banks for their more approachable credit unions.

"Credit unions are the good guys in all of the problems in housing. That was a big part of the inflow. The larger banks are just too big and bureaucratic," said Diana Dykstra, CEO of the California and Nevada Credit Union Leagues.

Dykstra said she noticed more baby boomers were taking advantage of the low rates in order shorten their terms through a refinance. Many, she said, planned to pay off their mortgage before retirement.

Much of the refinancing business went to places hardest hit by the housing downturn. In the Riverside, Calif. metro area, more than 44% of the borrowers owe more on their mortgage than their house is worth, according to CoreLogic (CLGX). But credit unions originated nearly $9 million in home loans there in the last three months.

Chris Collver, senior regulatory analyst for CANV, said the trend will continue as large firms grow more conservative or exit the more exotic mortgage business entirely.

Credit unions took up about 2% of the space in 2005. That grew to 6.7% of the home credit market in 2011, according to Collver.

"The big banks can't engage in those any more," Collver said.