6 FOCUSREPORT/Mortgage Lending
Navy Federal Credit Union circles the nation’s shores with members clustered
in some of the hottest housing
SAFE Federal Credit Union,
landlocked in the middle of South
Carolina, is increasing its mortgage business in a market it also
sees as robust.
Navy Federal ($81.5 billion in
assets, 6,994,229 members) is the
nation’s largest credit union and
81 times larger than SAFE ($1 billion in assets, 115,536 members).
The two intersect geographically
only in Columbia, S.C., the state’s
capital and home of the 100-year-
old Fort Jackson Army base.
SAFE’s headquarters is in Sumter, about 45 miles east of Columbia and home of the Shaw
Air Force base, whose employees
formed SAFE in 1955.
Despite their size difference,
both see similar trends: Housing
inventories are low, prices are rising and builders aren’t keeping up
“It’s a seller’s
market,” Brett Harvey, assistant vice
president of mortgage services, said.
The same words
came from Randy
Hopper, SVP of
at Navy Federal’s
Vienna, Va. The
area is home to
many current and
is to say Navy Federal members or
As interest rates have risen
since November, the refinance
boom has deflated while purchases haven’t made up for the
difference from last fall’s origination highs. First-quarter mortgage
originations for all types of lenders were either up only slightly or
down from year-ago levels.
The drop in refinances combined with slow growth of home
equity lines and purchases is
showing up in portfolios as real
estate takes a slightly smaller
share of total credit union loans.
As of March 31, real estate accounted for 49.6% of loans, down
from 50.3% a year earlier.
The biggest players have an
outsized impact on the industry’s
overall numbers, and that can be
seen in mortgages. The five largest
credit unions by assets accounted for 13% of all loans and 16%
of all types of real estate loans on
credit union books as of March 31.
This included a 21% share of 30-
year fixed-rate mortgages and a
45% share of adjustable-rate first
As of March 31, the top five are:
• Navy Federal. Its first mortgages
grew 9.1% to $27.3 billion.
• State Employees’ Credit Union,
Raleigh, N.C. ($36.5 billion in
assets, 2,227,734 members).
First mortgages grew 6.9% to
• Pentagon Federal Credit Union,
Alexandria, Va. ($22.4 billion
in assets, 1,517,949 members).
PenFed’s first mortgages grew
2.6% to $11.6 billion.
• BECU, Seattle. ($17.2 billion in
assets, 1,023,268 members).
BECU’s first mortgages grew
17.2% to $4.7 billion as of March
• SchoolsFirst Federal Credit
Union, Santa Ana, Calif. ($13.6
billion in assets, 747,327 members). First mortgages grew
The top five’s first mortgage
loan portfolio was $61.9 billion
on March 31, up 8.1% accounting for 17% of all credit union first
Among the other 5,732 federally
insured credit unions, first mortgages grew 10.6% to $299.4 billion. These others included SAFE,
which held $199.4 million in first
mortgages March 31, up 7.6%.
Outside of credit unions, the
overall trend for mortgages isn’t
as clear for the first quarter. The
Mortgage Bankers Association
showed a small increase from a
The MBA augments reports
from members with a predictive
formula for its numbers, while ATTOM Data Solutions in Irvine, Calif., relies on counts from property
records in counties covering 80%
of the U.S. population.
The numbers are not expected
to be exact matches, but usually
they point in the same direction.
Not so in the first quarter. The
MBA reported that originations
were $361 billion from January
through March, 3.1% higher than
the first quarter of 2016. According to the NCUA, credit unions
accounted for $30.6 billion of
those originations, up 16% from
a year earlier and accounting for
a record 8.5% share of U.S. first
The MBA reported purchase
loans for all lenders rose 15% to
$212 billion, while refinances
fell 10% to $149 billion. ATTOM
showed originations were down
21% as purchases fell 14% and refinances fell 26%.
For prices, the housing market
is softening, ATTOM Data Solutions SVP Daren Blomquist said.
“There is, I believe, some weakening of demand, especially from
buyers using financing, given the
uptick in interest rates at the end
of the year. That now makes it
more expensive to buy a home,
even if you had the same home
price,” Blomquist said.
Rates on 30-year fixed-rate
mortgages fell to a low of 3.5% last
summer, but have now risen to
about 4% and are likely to rise to
about 4.5% by year’s end, according to CoreLogic.
CoreLogic predicts overall originations will fall 18% to 20% this
year, even as purchase loans and
home equity lines of credit rise.
Refinances had been expected to
fall in the fourth quarter, but the
drop finally occurred this year,
“There’s also not a lot of inventory available. That puts downward pressure on the number of
sales as well when you don’t have
a lot of great inventory available
for sale, especially in some of the
hottest markets around the country,” he said.
Home equity lines were down
among all types of lenders, but
were up for credit unions. HE-LOCs grew 21.6% among the top
five and 5.8% among the rest of
Purchase volumes are up 10%
over a year ago. Refinances remained healthy through February, and have dropped off since
then as mortgage rates have risen.
As a result, refinances have fallen
from about 35% of volume a year
ago to 20% of volume this spring.
Hopper said the market is so
strong in some markets that houses are often sold without an open
“As soon as they list, they’re
starting to get offers, sight un-
seen,” he said. “There are so many
tools online that allow you to
check out comps and pictures. It
speaks to how challenging it can
be to get an offer accepted these
About 60% of Navy Federal bor-
rowers are first-time homebuyers.
Half its borrowers use VA loans.
Navy Federal has made a specialty of navigating the complexity of VA loans. It also takes other
steps to ease the home-buying
process for members, regardless
of their loan type.
It counsels buyers through a
pre-qualification process they
will need to begin shopping with
a specific loan and interest rate.
It can also refer buyers to its network of brokers through its Real-tyPlus program, which provides
discounts on commissions at
closing. For example, a borrower
would get back $900 on the sale of
a $174,000 house and $1,200 back
on a $210,000 purchase – a total
savings of $2,100.
“For us, as a relationship lender, it’s really about us putting our
members in the best situation
possible so they can put their best
foot forward when making an offer on a house,” Hopper said.
SAFE also considers itself a relationship lender, but doesn’t
have the profile of Navy Federal as
a mortgage lender.
About 70% of its loans originat-
ed in April and May were refinanc-
es for debt consolidation or mak-
ing other purchases, like boats.
Many of the loans use SAFE’s
cash-out refinances, which can be
as high as 95% loan to value, Brett
Harvey, assistant vice president of
mortgage services, said.
Interest in purchase loans is reflected in an increase in applications, Harvey said.
“A lot of them are shopping,” he
said. “It’s a matter of getting them
from pre-approval to closed sta-
tus. That’s the challenge. We’re
seeing an uptick in purchases, but
it’s not as high as we thought it
Credit unions as a whole sold
35% of the value of first mortgag-
es originated in the first quarter.
SAFE retains and services all its
mortgages as part of its strategy
to offer intimacy and build trust,
Vice President of Marketing Toby
“We’re not the big bank; we’re
the small credit union. You can
come here and make your pay-
ment,” Hayes said. “We really de-
pend on the service we provide to
them from the time of application
to the time that loan is paid off.”
SAFE launched a marketing
campaign in early June to raise
awareness of its mortgages. “Tra-
ditionally, it’s hard to get people to
wrap their minds around the fact
that credit unions do more than
just auto loans,”
promotes mortgages with low
For example, one
is a conventional loan with a 3%
down payment targeted to first-time homebuyers
One sign of the end of the recession is that millennials, once barely able to buy homes, are increasingly looking at new homes and
more expensive homes. Sometimes they have to wait.
“There are not enough contractors to go around,” Harvey said.
“They’re flooded. They’re scheduled two months out.”
CUs Strive for Mortgage Gains as Market Wavers