Traditionally, banks have provided the bulk of American mortgages. Freddie Mac and Fannie Mae, two government-sponsored enterprises, may back these mortgages, but it’s been established lenders with a national reach that actually extended the credit to many millions of homeowners.
Now that the economic crisis has demonstrated that big lenders may not have been doing a good job, the landscape of the mortgage lending industry may change. Credit unions may pick up some of the mortgage-lending opportunities left behind by the sub-prime crash.
As smaller lenders, credit unions tend to have less available capital than big banks. Credit union experts often point to the smaller portfolios of these local lenders and explain that a credit union may be much more risk-averse than the big national banks.
This has kept many credit unions out of the real estate lending market, but their promoters say this might be about to change. Bankrate is one source of financial advice recommending that consumers seeking a new mortgage should at least talk to a credit union, especially if they already are members.
Opportunities for Credit Unions
The American Credit Union Mortgage Association is a group that champions the entrance of credit unions into the mortgage lending industry. News reports from this group show that many credit unions are evaluating whether they can fill a “vacuum” that resulted from the mortgage-lending pullback by big banks, as well as the collapse of many sub-prime lenders in recent years.
These events have left a lot of room in the mortgage market for credit unions. Their enthusiasts also point out that many big banks are distracted by recent problems with their mortgage-lending operations: these might include buybacks from government-sponsored enterprises, as well as technical difficulties with mortgage servicing and inefficiencies in mortgage departments.
Beyond that, mortgage experts point out that new government regulations may make it easier for credit unions to get in on what many consider a “cash cow” of the lending field. Because of the unique fees mortgages generate, real estate lending can be a significant source of income for a financial institution. It remains to be seen whether America’s credit unions will take advantage of the opportunity.