Credit unions occupy a relatively small share of the overall mortgage market. But when the COVID-19 pandemic took root, they quickly readied themselves to assist borrowers who suddenly could not pay their home loans.
According to a study by Callahan & Associates, credit unions accounted for 7.1% of the nation’s total mortgage origination during 2018, the latest available year for industry-wide data. Credit unions accounted for $142.2 billion of the total $2 trillion in mortgage production – far behind banks and mortgage finance companies that accounted for 47.2% and 45.6% of the nationwide loan origination balances, respectively.
Before the coronavirus became widespread in the U.S., credit unions that were active in the mortgage space were enjoying a vibrant activity.
“What I was hearing was no surprise: they were very, very busy,” said Tracy Ashfield, president of the American Credit Union Mortgage Association. “Their pipelines were very full, predominantly with refinance loans, and our members are still reporting new application activity on through their online channels.”
A typical example of this situation is Metro Credit Union in Chelsea, Massachusetts, whose chief executive, Robert Cashman, reported a mortgage pipeline that was “the strongest and the largest” it had ever been. Active participation in the secondary market coupled with a carefully maintained portfolio helped keep the credit union’s mortgage operations running well, Cashman added.
“People were coming to us because not only do we have price, but we have great competitive rates,” he said.
Brett Weir, vice president of mortgage lending at United Federal Credit Union in St. Joseph, Michigan, was also experiencing a lively mortgage business before the viral maelstrom.
“We’ve been busier in the first quarter of 2020 than we’ve been in the 11 years that I’ve been here at United,” he said. “Because of the rate environment, refinance activity has been quite high, and it continues to be for members who have fewer challenges and are able to take advantage of the rate environment. Purchase transactions have slowed, and they’re typically slow in the first quarter of every year. But we had a pretty mild winter, so we were seeing unique trend on the purchase market, too.”
Kendall Garrison, CEO at Amplify Credit Union in Austin, Texas, recalled that “when this crisis began to build and rates started to fall, we saw our mortgage pipeline double in about 11 days. So, it’s been shocking.”
Garrison added that that although his Austin metro area is a “very strong purchase market with a low level of inventory,” the purchase business is slowing due to a construction ban now in place and social distancing guidelines that prevent potential buyers from visiting what relatively few properties can be found.
“The purchase market is going to slow down over the next 30 days,” he lamented. “But refinance is very, very strong.”
On the other hand, the continued interest in mortgage applications is creating a unique problem for these lenders.
“I think most lenders are dealing with a drastic increase in terms of applications,” said Kevin Parker, vice president of Field Mortgage at Navy Federal Credit Union in Vienna, Virginia. “We’re being transparent with our members. A refinance today will take longer than they may have experienced in the past. However, we’re honoring locked in rates for an extended period of time. There are so many external factors that could slow the process, so we’re trying to help our members understand that everyone in the process is doing the best we can.”
ACUMA’s Ashfield pointed out purchase loan activity will be further delayed by new burdens placed on traditional appraisals.
“Appraisers are not going into people’s homes right now with social distancing, so we’re needing to look at alternative ways to evaluate the value of collateral,” she said. “There are unique challenges as a result of the pandemic.”
As for those already holding mortgages, the main challenge facing lenders is an unprecedented wave of borrowers who suddenly found themselves in financial distress after being laid off from work. However, Amplify Credit Union’s Garrison theorized that credit unions were ready for this challenge thanks to the lessons absorbed during the last great national catastrophe.
“I think the thing that we learned from the 2007-2008 housing crisis was to act early, to act decisively, and to do everything we can to keep our borrowers in their homes and give them a path to maintain the equity in their home,” he said. “In any event, that is that is what we’ve done decisively this time, as well.”
Amplify Credit Union is offering deferred payments to mortgage borrowers who claim newfound financial hardship, but Garrison stated his staff is not demanding excess paperwork to verify the need for such aid.
“We’re not asking our borrowers to detail the level of hardship,” he said. “If they call us and tell us they have a hardship, we accept that and move on.”
Ronald McLean, president and CEO of the Cooperative Credit Union Association, said that the credit unions in the four states represented by his organization – Delaware, Massachusetts, New Hampshire and Rhode Island – are “working with members on loan modifications and deferral of payments for upwards of 60 days or 90 days,” he said, adding that credit unions are also offering “emergency hardship loans of various dollar amounts, typically up to either $2,500 or $5,000, with no interest for 60 days.”
McLean also pointed out that unlike many financial services providers which have been flooded with calls from customers and are unable to respond with great speed, credit unions are cognizant of the need for immediate communications.
“Many credit unions have extended their call centers’ hours and some have contracted with additional third parties to provide additional assistance. There’s been a problem of being able to get to their credit union – many transactions are taking place via drive-thru and, in other cases, credit unions are having members come into their branch lobbies by appointment only.”
Jacqueline Ramsay, vice president of media relations and communications at the National Association of Federally-Insured Credit Unions, observed that unlike banks and other financial institutions, credit unions have a greater stake in needing to be ahead of the curve in ensuring borrowers are well-treated.
“Credit unions have always been prudent stewards of their funds,” she said. “They are very connected to their members – they have to be, because they are not-for-profit cooperatives. With everything that a credit union makes, they give back to their communities and their members because the members are not just customers like in a bank, but are owners of the credit union that they have joined. There are no board shareholders – its members are the shareholders.”
Ramsay added that prior to the current pandemic, many credit unions already had mortgage assistance programs in the event a borrower ran into a rough patch and needed help.
“Being a credit union means we are always going to be there to help uphold the members, because the members are the credit union,” she said.