PenFed more than doubles 4Q mortgage applications

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Headquarters of the Pentagon Federal Credit Union. (Source: AdobeStock)

PenFed Credit Union continued to set internal records in the fourth quarter, with growth ranging from autos to mortgages.

Data provided by the nation’s third-largest credit union shows its residential mortgage lending more than doubled from about $8.1 billion in 2020 to $18.9 billion in 2021. For the three months ending Dec. 31, PenFed said it originated $6.3 billion in mortgages, down from $2.4. billion a year earlier and $5.4 billion in the third quarter.

By contract, the Mortgage Bankers Association estimates that total issuance fell 3% last year, while fourth-quarter issuance fell 34% from its peak in the fourth quarter of 2020. This year, MBA predicts a 35% drop in originations.

PenFed Chief Financial Officer Jill Streit said Wednesday that this year will be tougher for mortgages. Mounts won’t more than double like they did last year, but she still expects them to grow by a “double-digit” percentage increase.

“We still believe we have plenty of opportunities to serve our members,” Streit said. “There are still a significant number of members who do not come back to us for their mortgage needs.

“Despite the headwinds to our volume, we are very optimistic about our ability to grow market share,” she said.

    Jill Streit Jill Streit

Growth will be driven by home equity lines of credit.

With the housing shortage, some households that were considering moving to a larger or more suitable home are considering renovating their current home and financing it with a home equity loan.

“We’re starting to see a shift in consumer behavior around our HELOCs,” she said.

Streit also expects further growth in consumer loans, which include auto loans, credit cards, personal loans and student loans. She said consumer borrowing would return to a more normal “post-Covid lifestyle” this year.

PenFed said it originated $11.7 billion in consumer loans in 2021, up 39% from the $8.4 billion in consumer loans it reported for 2020. About 3.3 billion dollars of consumer loans took place in the fourth quarter of 2021.

Automobile creations amounted to just under $4 billion last year. “We had a strong appetite for automobiles in 2021, and we expect that increase to continue into 2022,” Streit said. “We are seeing continued consumer demand for auto loans, in both direct and refinance, new and used markets.”

Streit expects rising interest rates this year to hurt PenFed and other credit unions most directly by reducing the number of mortgage refinances.

Streit said PenFed will be buffered to some extent as it relies less on refinances: They made up about half of mortgages last year, while the Mortgage Bankers Association found refinances made up nearly 60% of value. and the number of transactions for all lenders.

But MBA expects refinances to fall 63% in value this year, and Streit said that kind of drop would hurt PenFed even if mitigated by its low exposure.

On the other hand, Streit said higher interest rates will relieve PenFed and other credit unions from the margin squeeze that occurs when rates approach zero.

Credit union net interest margins fell from a high of 3.19% in the fourth quarter of 2019 to a low of 2.57% in the first half of 2021. They increased slightly in the third quarter. Streit said she expects further improvement this year.

PenFed also reported:

  • 2.4 million members in December 2021, up 20% from around 2.2 million a year earlier.
  • Assets reached $32.5 billion as of December 31, compared to $26.7 billion at the end of 2020.
  • Its total loan portfolio ended the year at $23.8 billion, up 25% from $19.0 billion a year earlier.
  • Secondary market loan sales of $12.2 billion in 2021, more than half sold to other credit unions. In 2020, PenFed sold and participated in $5.3 billion in loans to other credit unions.
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