U.S. credit unions posted another year-over-year increase in mortgage originations in 2021 but lagged the growth posted by all lenders in the aggregate.

The credit union industry funded $292.35 billion in home mortgages in 2021, up 5.9% from the prior year, based on recently released Home Mortgage Disclosure Act data compiled by S&P Global Market Intelligence. But even with the increased production, credit unions lagged the more than 8% growth posted by all lenders in aggregate year over year in 2021.

Navy FCU stays on top

Navy FCU maintained its position as the top mortgage lender among all U.S. credit unions by a wide margin. The credit union funded $24.94 billion in mortgages loans in 2021, more than double the amount funded by Pentagon FCU, the No. 2 credit union by mortgage volume.

Despite its dominance among the credit union industry, Navy FCU only holds 0.52% of market share among all lenders, putting it in the 32nd spot among all lenders.

Over the years, nonbank lenders have increasingly gained market share from banks and credit unions alike.

Seven of the top 10 lenders in 2021 were nonbanks. Nonbanks also outpaced the 8% year-over-year growth across all lenders in 2021, posting a 10.6% increase in mortgage originations year over year.

Largest moves year over year

While the credit union industry as a whole lagged the growth all lenders saw in aggregate in 2021, a number of credit unions posted large year-over-year growth.

Associated CU experienced the greatest growth with a 1,156.9% jump in funded loans year over year. Another four credit unions posted more than 200% growth in mortgage originations year over year in 2021.

While many credit unions posted strong growth year over year as consumers rushed to refinance or purchase new homes ahead of rising rates, some credit unions already felt the squeeze of declining mortgage activity in 2021.

Keesler FCU, Heritage FCU and DuPage CU all saw at least a 40% decline in funded mortgages year over year in 2021, and a number of other credit unions saw declines above 30%.

Large year-over-year declines in mortgage originations will be even more common in 2022 as lenders feel the pressure of the current economic environment. Mortgage origination and refinance activity has slowed drastically in 2022 as the Federal Reserve works to combat inflation by rapidly raising interest rates.

The Mortgage Bankers Association estimates total one- to four-family mortgage originations in 2022 to decline by nearly 40% from 2021. Refinance activity is expected to take the largest hit, with the Mortgage Bankers Association projecting a 69% decline year over year.

As a result, a number of the largest lenders in 2021, such as No. 3 Wells Fargo & Co. and No. 4 loanDepot Inc., are turning to massive layoffs to offset the slowdown in activity and subsequent loss of income.

"The market decline in 2022 has been particularly sharp and abrupt compared with past cycles," loanDepot President and CEO Frank Martell said on a July 12 call to discuss the company's downsizing and cost reduction plan.