In 2004 the top five overall funders of mortgages — Countrywide, Wells Fargo, Washington Mutual, Chase Home, and Bank of America -- saw their residential production fall by 30% (as a group). But the top five credit union funders (listed below) saw their residential production fall by a more modest amount, just 16%. What does this tell us about the role CUs play in mortgage banking today?

Interpretations can be tricky but on the surface it appears that credit unions are continuing to increase their presence in mortgage banking — at the expense of traditional players. It also (likely) means that credit union customers probably feel some type of affinity with the institutions they are members of. The key word here is "member." When you're a member of something it's like a club — be it an employment-related club, or a neighborhood/geographic club, but nonetheless it's a club. Do bank and S&L customers feel that way about their financial institutions? Probably not.


As we've noted in past editions of this book it's no secret that commercial banks hate credit unions. (S&Ls aren't so crazy about CUs either.) Last year the nation's three leading trade associations for banks joined together to fight credit unions by pushing for a repeal of their tax exempt status. (The banks, as usual, lost the battle.) And why do banks and S&Ls dislike CUs so much? Because CUs are competition — that's why, especially in the residential mortgage arena. Not only are CUs competition for first lien products but they're active HELOC lenders and servicers as well.

In 2004 three credit unions funded $1 billion or more in home mortgages. The year before the figure was the same. In 2004 seven credit unions funded $500 million or more in home loans, a bit of comedown from 2003 when 18 CUs passed the $500 million mark.

Yes, it would appear that CUs are doing well in residential finance — and several are doing really well. Chief among the top performers is Navy Federal Credit Union of Merrifield, Va. Not only was Navy Federal the largest overall CU funder in 2004 but it originated $1.8 billion in second liens, almost doubling its HELOC volume from the year before. Navy Federal out-funded its closest CU competitor (State Employees CU of Raleigh, N.C.) by almost $4 billion. It should be pointed out that Navy operates in one of the hottest housing (and mortgage) markets in the U.S., Washington, D.C. In 2005 the Washington area housing market showed no signs of slowing down. Expect the same for 2006.

The Rankings, the Outlook

In this chapter we present the top 300 credit unions in terms of their mortgage holdings. We also present a one-line ranking of the top 100 CU residential originators and the top 50 HEL and HELOC funders. The figures appearing in this chapter were compiled by Veribanc for the Mortgage Industry Directory, using call reports that CUs filed with the Federal government. Many CUs also hold millions in mortgages on their balance sheets. (See the company profiles in this chapter.)

In the years ahead CUs will continue to be fierce competitors in mortgage banking. But keep in mind that CUs are suffering from the same malaise that S&Ls and banks are suffering from: a declining number of institutions. But as the number of CUs decline the overall asset size of the CU industry (as well as its employee base) continues to grow. In general, that's a good sign.

In 1970 there were 22,000 federally insured credit unions operating in the U.S. Over the past 35 years the number of FCUs has been declining steadily and in early 2005 the figure fell below the 9,000 mark. It hasn't been that low since 1960. Jeff Taylor, an economist for the National Association of Federal Credit Unions told us that, "I don't think there is any significance to this as a trigger point, per se, but it does indicate the trend toward consolidation."

Mr. Taylor noted that the consolidation trend isn't just affecting federal credit unions. It has affected state chartered CUs as well. NAFCU believes the vast majority of consolidation is the result of mergers — and not "forced" mergers. In others words, CUs are combining forces not to survive but for strategic purposes. Every year about 15 to 20 credit unions are merged out of existence because of their shaky financial health — that's not a large number at all. The average size of a credit union is $65 million and the median size is about $12 million. (A "small" bank has $1 billion in assets, a small CU has $2 million.) As the number of CUs decline the overall asset size of the CU industry (as well as its employee base) continues to grow. In general, that's a good sign.