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March 3, 2022

4 Reasons Credit Unions Will Be Strong Mortgage Competitors in 2022

Credit unions are poised to be strong mortgage competitors during 2022. Here are the four main reasons why.

The process our industry uses to originate a purchase money mortgage loan is very different from the process for originating a refinance loan. Every lender knows this. Purchase money lending requires a slightly different skill set to perform at high levels. Some lenders will also employ different technologies, but that’s not required. 

The difference for the consumer is far more significant. 

When a borrower approaches a lender for a refinance, they are more likely to remember the previous transaction. They will feel more experienced and therefore will approach with less trepidation regarding the outcome. After all, they’ve already got the home and a mortgage. They’re just working to get a better deal. 

New home buyers, on the other hand, have a lot at stake. If they don’t get this deal done, they could lose their dream home. If their current home has already sold, this could be a serious problem for them. They have plenty of reasons to be nervous. 

Lenders who can put borrowers at ease during this transaction will be more successful in the year ahead. Some mortgage loan officers making the switch from originating refinance loans might get this done. But you know who’s really going to shine here? Credit unions. 

The advantages in the credit union lending model 

The home mortgage, like everything else the credit union does, is a member-driven financial transaction. Since credit unions serve a broader charter than just home finance, much of their time and effort is spent helping their members with other financial products. As a result, credit unions haven’t traditionally been viewed as mortgage market leaders. 

But in an age where the borrower’s experience is driving business to financial institutions who can meet high expectations, credit unions are well positioned to grow their mortgage business. In fact, they’ve been doing so, as a group, for the past two years.  

According to HMDA data, credit unions had a record year for mortgage originations in 2020. Credit unions saw mortgage volume increase by 71.6% year-over-year and originated $316.7 billion in total originations. 

We think there are a number of reasons for this. 

Where credit unions are strong 

First, they have a special relationship with their members that seems to make borrower satisfaction core to their overall mission, or at least closer to it. Unlike many independent mortgage lenders who originate a mortgage and then sell it off almost immediately, credit unions often service their own loans and keep their members close. 

Second, because they don’t typically view other credit unions as competitors but rather as sister institutions, they tend to help each other more. Peers are more likely to share information that will make another credit union successful and it contributes to the success of the entire sector. 

Third, they lend against their balance sheets, using deposits for liquidity. This means they are not responsible for meeting an investor’s requirements but can work more closely with their members to fit them into the loan that makes most sense for them. And they have no need to work with warehouse lenders and incur those additional expenses. 

Finally, these institutions are pretty tech savvy. While credit unions haven’t given up their branches and continue to provide a physical presence in the communities they serve, they are also making impressive progress on the path to digital with about half saying they are “pretty digital.” 

All of this tells me that credit unions will be strong mortgage competitors in 2022. This is not to say that forward thinking and well managed banks and independent mortgage lenders won’t give them a run for their money, but it will take some work to do so.

By Joe Camerieri, EVP, Client Account Management at Mortgage Cadence 

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Mortgage Cadence: 
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(516) 480-6765