NEW YORK–Credit unions boosted second liens by more than $25 billion in the first quarter of 2024 vs. the same period in 2023, a new analysis shows.
“Credit unions have become a go-to source of financing for homeowners looking to pull equity out of their properties,” stated Morningstar in its analysis of data compiled by BofA Global.
The data show second-lien mortgages at credit unions in the U.S. increased by $26 billion in the first quarter of 2024 compared to a year before, while banks ramped up their second-lien holdings by only $5 billion over the same stretch, according to BofA Global.
“Home-equity lines of credit, or HELOCs, and second liens represent a small but growing source of funding for homeowners reeling from higher borrowing costs since 2022, when the Federal Reserve began to aggressively hike interest rates,” stated MorningStar.
Half-Trillion-Slice
HELOC and second liens currently represent only about a $512 billion slice of the U.S. housing-finance market, the BofA data show, MorningStar reported.
Of the second-lien total, credit unions were sitting on about $136 billion in the first quarter, while banks were holding another $32 billion, the report added.
“The second-lien market likely has further room to grow if more homeowners look to pull out cash from the estimated $33 trillion pile of home equity built up during the pandemic,” MorningStar said. “Supply shortages of new homes have led property prices to double in less than a decade, and high mortgage rates make it more expensive to cash out by refinancing an old mortgage.”
No Surprise at No. 1
Not surprisingly, MorningStar noted Navy Federal Credit Union dominates the market for second liens among credit unions with $5 billion in holdings, followed by more than $2 billion held by BECU in Washington, Mountain America Credit Union in Utah, and the Pentagon FCU in Virginia.