Published in: CUNA Councils

Success in mortgage lending requires proper risk management and utilizing secondary marketing techniques that can help fulfil that role.

In 1977, P.L. 95-22 expanded lending authority for credit unions. Since then, credit unions have been even more critical in servicing the growth of the country’s home ownership; forty years on, this is particularly evident. Credit unions posted a record-high of $172 billion in mortgage loans in 2016, and 2017 is on pace to surpass that record.

With continued importance in this vital market, an enhanced focus on secondary market risk management can profitably deliver loans to investors, while minimizing risk to the institution. For credit unions originating with the intent to sell, this risk-management process is not only essential, but it is also starting to receive more regulatory scrutiny.

Origination Volume and Production Sold

While credit unions continue to expand mortgage origination, the quantity of sold first-mortgages is ticking down. Figure 1 illustrates that since 2013, sold production has dropped notably; in third quarter 2017, this represented just 41% of first lien mortgage production.

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