The unscathed lenders

As troubles with residential mortgages begin to bubble in the wake of this decade's housing boom, one segment of lenders credit unions have escaped so far.

Among the $46.5 million in mortgages that credit unions in Washoe County hold in their own accounts, not a single one was delinquent at the end of the third quarter, according to figures compiled by the Nevada Credit Union League.

Credit unions, like other lenders, routinely sell a large portion of the loans they write into secondary markets, and the $46.5 million in mortgages on credit union books reflect only a small percentage of their overall mortgage lending.

But even among the loans that they've sold, industry officials say delinquency rates remain remarkably low, although the industry group doesn't have figures.

Credit union executives cite two reasons that their loans haven't gone sour.

On one hand, the non-profit cooperatives owned by their members typically are conservative. That means they didn't rush into the exotic mortgages loans with low initial payments followed by a big upward adjustment in a few years, for instance that were widespread as the housing boom peaked.

"We recognized early on that this wasn't where we wanted to be with our members. It was the right decision," says Robert Taylor, the chief executive officer of Greater Nevada Mortgage Services in Carson City.

Other credit unions followed a similar path.

Out of the $46.5 million in first mortgages on Washoe County credit union books at the end of last year's third quarter, only $2 million were adjustable-rate mortgages. The rest were traditional fixed-rate loans.

Taylor acknowledges that his organization, as well as other credit unions, lost some potential customers to for-profit mortgage lenders who were willing to bend farther to get homebuyers into houses.

Today, he says, Greater Nevada Mortgage Services is seeing some of the same customers who now are anxious to get out of an exotic loan into a fixed-rate mortgage that they can handle.

Even though some borrowers went elsewhere, real estate lending continues to grow at credit unions. The dollar amount of first mortgages on the books of Nevada credit unions on Sept. 30, for instance, was 2.4 percent higher than the previous quarter. And nationwide, real estate lending accounts for about three quarters of loan growth in credit unions.

A second factor that contributes to the low delinquency rate, credit union executives say, is the relationship that the institutions have with their members.

"It's in the nature of the credit more than anything," says Dennis Flannigan, executive vice president of Great Basin Federal Credit Union in Reno. "When someone comes to us for a mortgage loan, we already know them."

Mike Nutt, a spokesman for the Nevada Credit Union League, also notes that the loyalty that members feel to their credit unions means they are more diligent about repaying their loans.