Financial Institutions See Growth in Mortgages Despite New CFPB Regulation
July 2016

Financial Institutions have seen a surge of interest in their mortgage products in recent years.

According to CUNA data reported by Credit Unions Online, credit unions have experienced a 34 percent increase in mortgage loan interest after years of posting anemic growth. The trend is supported by homebuying data from the National Association of Realtors, citing a 10.3 percent jump in signed contracts during the past year.

“After posting year-over-year declines for almost two years, the nation’s CUs have generated positive annual gains for 18 consecutive months,” said Dave Colby, of CUNA Mutual Group. “Reports from the field indicate growing member demand for credit, as economic conditions improve. This is especially true for local economic indicators for employment and real estate prices.”

The bump in mortgage loan demand is being felt by many financial instituionsa across the country looking to diversify their loan portfolio management. For instance, State Employees Credit Union, located in Raleigh, N.C., reported first time homebuyer mortgage loan balances that surpassed the $1 billion threshold. A figure that Spencer Scarboro, the senior vice president of loan originations at SECU, is pleased with given the minimal number of losses deriving from those loans.

Texas Trust Credit Union is another mortgage success story. According to its vice president, Richard Whitman, both loan originations and refinances are up. He attributes that to favorable market conditions and low rates.

“The most significant trend we’ve spotted is a migration away from longer term 30-year loans,” Whitman told Credit Unions Online. “While in past years, the vast majority of mortgage loans were closed on 30-year terms, so far this year less than 24 percent of new loans have been on 30-year terms, while 65 percent have been on terms of 15-years or less. Members are taking advantage of the lower rates to build equity faster by shortening their loan terms.”

New regulations make amends for credit unions

After the Consumer Finance Protection Bureau released new regulations intended to correlate a borrower’s ability to repay with the total amount of the loan in order to prevent predatory lending schemes that arose during the housing bubble, financial institutions expressed concerns about their ability to offer products and lend to people who need it and were credit worthy, but that didn’t fit new regulations.

“We have to do what we can to lessen the impact of qualified mortgages so we can still give loans to people with credit of good quality that may go over the 43 percent ratio,” Jim Picard, vice president of home loans at Denali Alaskan Federal Credit Union, told Credit Unions Online.

Picard noted that, within the industry, 10 percent of loans do not meet the new standards and thereby shutting out those potential borrowers.

“Ten percent is a big number given the fact that we’re nationally still trying to recover our housing market,” Picard said. “Another 10 percent is a few more nails in the coffin, so to speak.”

As outlined by Lauren Capitini, CUNA Mutual compliance manager, credit unions could still be in full compliance with CFPB regulations by underwriting the 10 percent of non-qualified mortgages. In order to do that though, the credit union would need to fill out eight underwriting stipulations that more closely examine a borrowers income and debt history – something responsible credit unions are probably doing anyway, according to the Credit Union Times.

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