Credit Unions Increasing Their Mortgage Business : Loans: The larger institutions are moving more and more into the business of making home loans to members.

Mortgage lending might not come to mind when you think of credit unions, but these institutions, long a stronghold of low-interest-rate auto loans and other consumer loans, have been increasing their mortgage business in the past few years.

Some credit unions have been offering mortgage loans since 1978, when federally chartered institutions were permitted to offer 30-year mortgages. Many expanded and many more decided to enter the mortgage market, beginning in 1986, to take advantage of the red-hot housing market, according to Niel Moser, senior vice president of CUNA Mortgage Corp., a subsidiary of the Credit Union National Assn., a trade group.

That expansion was further spurred by the fierce competition beginning in 1987 from auto-finance companies and banks in marketing low-rate auto loans and other consumer loans, Moser said. The credit unions found themselves with an eroding market share and surplus funds because they were making fewer consumer loans.

The rise in mortgage loans has been significant in the past few years. Since 1986, the mortgage share of credit unions’ total loan portfolios, measured by dollar volume, has risen almost 50%--from 21.3% of all loans outstanding to 31.4% as of June 1989--according to Charles H. Bradford, chief economist for the National Credit Union Administration in Washington, which regulates federally chartered credit unions.

Most of the growth occurred during the booming housing market of the past few years. It is likely to slow during the current downturn.

In 1988, 30% of the nation’s credit unions offered first mortgages, according to Jerry Karbon, public information manager at the Credit Union National Assn., based in Madison, Wis. That compared with 29% in 1987, and 26% in 1986. The association said that 35% of credit unions make second-mortgage loans, and 21% offer home-equity lines of credit.

Bradford points out that while the growth of credit unions’ assets and deposits in the past year has been the slowest since 1979, credit-union loans grew a “solid” 12.3% from June, 1988, to June, 1989.

Credit unions’ mortgage business is still a drop in the bucket of total mortgage lending. Bradford says that credit unions account for just 2% of residential mortgage loans made in the United States. In 1988, credit unions made $7.5 billion in first mortgage loans. Moser does not believe that mortgages will ever dominate credit unions’ loan portfolios.

“Mortgage lending is not, nor will it ever be, a major part of credit unions,” he said. “Their mission is not housing.”

About 99% of credit unions’ mortgage loans are for residential properties, Bradford said.

Most loans are made by the larger credit unions, he said--those with assets of at least $10 million. But a lot of the growth of recent years has come from smaller credit unions that are starting to make mortgage loans.

The United States has 15,266 credit unions with 60.4 million members, Karbon said.