As Prepared for Delivery on September 23, 2019
Thank you very much. It’s my pleasure to join you this morning, and I’m delighted to see so many old friends and colleagues.
This isn’t my first visit with ACUMA, and I know it won’t be my last. But it’s hard to believe this is the last time we’ll be gathering together under Bob Dorsa’s leadership. ACUMA never would have existed without Bob, and it never would have grown into what it is without his vision and steady guidance over the years. And while we know he’s leaving the organization in the most capable hands, he’ll be missed.
Bob, thank you so much for everything you have done for this organization, and for the credit union industry as a whole, over the last four decades.
I wanted to begin with that recognition of Bob’s contributions, because as much as anyone, he is responsible for elevating home lending as a priority for the credit union industry. And the numbers tell the story:
- Many of you may recall that a couple of decades ago, credit unions’ role in mortgage markets was negligible. But today credit unions hold almost 5 percent of outstanding mortgage debt in the United States, as well as a larger, and growing, percentage of second mortgages.
- The credit union industry is originating more than $160 billion in real estate loans each year, and more than $100 billion of that total is first mortgages.
- The pace of mortgage lending in the credit union industry is also accelerating —with growth in the last five years alone of more than 60 percent.
Perhaps most importantly, credit unions have distinguished themselves by the quality of the mortgage loans they originate. Altogether, credit union mortgage lending is strong and getting stronger.
Tracy Ashfield will be taking over as president. Tracy has big shoes to fill, but we know he will do well, and will honor Bob’s fine legacy.
Importance of Homeownership
That’s an important story to tell, because it underscores a fundamental truth that we all recognize: homeownership is a critical way that families build wealth.
The poet T.S. Eliot once wrote, “Home is where one starts.” For most of us, it’s a fundamental part of our identities, our sense of self, a place from where we look at and define our world. On a practical level, buying a home is how most people build wealth and a measure of financial security.
One of my top priorities since I rejoined NCUA as chairman, almost six months ago, has been to focus on financial inclusion, which I see as one of our top challenges in terms of rebuilding confidence in the economy and helping under-served communities. I believe it’s essential to help more people take that first step towards financial security.
And very often when we talk about financial inclusion in the policy world, much of our focus is on the most marginalized people — the unbanked, the underbanked, people who lack access to reliable, affordable financial services. That focus is perfectly appropriate, because reaching those underserved populations, and getting them to take that first step on the ladder toward financial security, is a critically important goal.
But while we focus on getting people to take that first step on the ladder, we need to also talk about what happens next. Once you’ve got them into the financial system, how do we keep them moving up that ladder? How do we help them to take that next step, and move toward building wealth?
For a great many of those people, and for a great many of your members, the next step is going to be homeownership. Owning your own home has traditionally been one of the key parts of the American dream.
Moreover, it’s well-established that homeownership plays a strong role in building strong communities where people are invested in one another’s lives and futures. That’s a powerful remedy for so many of the social and economic challenges we face. Places with high rates of homeownership are likely to have a larger tax base, lower crime rates and a stronger commitment to volunteerism and community service.
I’ve seen firsthand the powerful difference homeownership makes, both in terms of helping families to build wealth and in helping communities to thrive.
It’s not necessarily a silver bullet, but a responsible, sustainable approach to homeownership correlates to a great many desirable outcomes. It’s something we definitely want to encourage, and that’s a goal that many of you have been working very hard to advance.
Challenges to Homeownership
At the same time, we need to be clear about the challenges to homeownership. While the housing market remains strong, we do need to be attuned to any trends that might suggest otherwise.
One of those challenges is any perceived “hangover” from the last financial crisis, which was fueled in part by mortgage lending practices that were unsustainable and, let’s be perfectly frank, often irresponsible. Many lenders damaged their reputations, and the mortgage market, in the lead-up to the 2008 crisis. I will emphasize that I’m not talking about credit unions here. But a great deal of trust was squandered, and while things have improved, there’s still work to be done to rebuild confidence.
That may be particularly true among younger generations who came of age during the crisis. We’ve seen a reported slowdown in the rate of home-ownership by younger consumers. One recent study (opens new window) (You will be leaving NCUA.gov and accessing a non-NCUA website. We encourage you to read the NCUA's exit link policies. (opens new page).) suggests that Americans of the millennial generation are delaying home purchases. In 2015, the rate of homeownership for buyers age 21 to 37 was 37 percent, significantly lower than earlier generations at a comparable age.
There are a number of factors at work here, including: student debt, delayed family formation, uncertainty about future earnings prospects. This may be a temporary aberration, and as this population of younger consumers moves a little further down the career path and starts to form families of their own, they’ll embrace homeownership at higher rates. Still, it’s something to watch closely.
And the situation is made more difficult by the limited supply of affordable housing in many areas, which is a significant concern. Again, this may be in the process of correcting itself, but it’s another challenge we should watch closely.
Credit Unions and Mortgage Lending: A Growth Opportunity
These trends all could be challenges to the American tradition of homeownership, at least in the short term. But what I want to emphasize is that credit unions are well-poised to help address virtually every one of those challenges and to turn them into opportunities for the long term.
After all, it wasn’t credit unions’ lending practices that fueled the last crisis. You held fast to the tradition of service and trust that has marked this industry from the beginning. And that speaks to one of this industry’s great advantages, which is your focus on building relationships with your members and your communities. Those relationships are the key to building a system of sustainable homeownership.
Likewise, credit unions are an ideal financial services solution for many younger consumers, like millennials and upcoming generations. That will require reaching out to these demographics in new ways, and technology will certainly play a big role.
For instance, I know many of you are experimenting with financial technologies, like mobile banking and online applications, to make the lending process faster, simpler and more efficient. I encourage you to continue exploring these avenues, because they will likely make it possible for you to reach more qualified borrowers at a lower cost, without compromising your lending standards.
Credit unions are also in an excellent position to nurture homeownership in under-served areas, where it will make a big difference in terms of reviving and supporting communities. For example, we’ve seen how rural America has lost so many financial institutions over the last decade. That could represent an opening for credit unions to extend lending and other service to these places. We need fresh thinking on how to provide these communities with the oxygen they need to survive.
So my message to you is that, as you look to build out your mortgage lending portfolios and to make homeowners of more of your members, we want to support you in that. We expect at all times you’ll comply with your regulatory responsibilities, to ensure the safety and soundness of your institutions. But our goal is to create a regulatory framework that makes that work for you. With a balanced approach to regulatory reform we can have a system of rules that is effective but not excessive.
As you may have seen, the Trump administration has released its plan for housing finance reform. Many aspects of this plan show how critical it has been for credit unions to have a seat at the table. This reform plan reflects the fact that America’s credit unions will and should continue to form many of these critical loans.
Those are a few of the things we’ve been working on, and I’m pleased to report we have the full-fledged support of President Trump and his team in pushing forward on our regulatory reform agenda. But it’s not a one-way street. We need to hear from you, so let us know what we can do to make the regulatory system work more effectively.
Although credit unions have certainly expanded their share of the mortgage lending market, there’s still tremendous opportunity for growth. Today, the credit union system serves more than 118 million members, and many of those have not yet made the step to become homeowners. You all can play a critical role in helping them to take that next step.
But I want to emphasize that mortgage lending is more than just a growth opportunity for your institutions. It’s also a way for you to extend the industry’s long tradition of service to communities and to borrowers of modest means.
In June, the NCUA celebrated the 85th anniversary of President Franklin Roosevelt’s signing of the Federal Credit Union Act in 1934. This industry has come a long way from that original vision for a system of cooperative credit that is responsive to local needs.
Many things have changed in our society and industry since then, but the fundamental credit union mission has not changed — as always, it’s about people helping people.
Because that young couple sitting across the desk from you applying for a mortgage loan is more than just a credit score, they’re not just part of an algorithm or an entry on a spreadsheet. They’re people with dreams for the future, who you can help to take that next step up the ladder with confidence. Our challenge now is to work on reaching more of those people. America’s credit unions are especially well-placed to overcome these challenges.
That’s a vital part of the credit union mission, and an important step toward achieving financial inclusion for more working families. So thank you very much for all you do, and thank you once again for having me today.