With over 90 million members nationwide, U.S. credit unions offer an alternative to banks. These non-profit financial institutions are member-owned. Members pool their money, which in turn is used to provide loans for those members.

According to Mark Wolff, Senior Vice President of Communications for the Credit Union National Association (CUNA) (via email), U.S. credit unions have largely avoided the sub-prime meltdown. In fact, according to CUNA's website credit unions mortgage lending has increased over the past year.

Credit Unions' Structure Keeps These Financial Institutions in the Lending Market

There are two major reasons why credit unions have largely been able to avoid the worst consequences of the recent mortgage/foreclosure turmoil.

The first reason has to do with the credit union operating structure. According to Wolff, "credit unions, as not-for-profit cooperatives, are typically more conservatively managed than for-profit financial institutions. Because they return earnings back to their members rather than generate profits for outside investors, they do not have the same incentive to take risks, and so largely avoided the subprime meltdown."

CUNA Senior Economist, Mike Schenk echoed that analysis in a separate email communication. Schenk contrasts the credit union structure with that of for-profit entities like banks and mortgage brokers who seek to maximize profits, regardless of the effect on consumers. Schenk points to for-profit entities who maximize fee income from first mortgage originations, saying they have been identified as major contributors to the current sub-prime situation.

The second reason that credit unions have been able to avoid the current mortgage meltdown, according the Schenk, is that these institutions hold most of their mortgages in portfolio. He cites CUNA statistics showing that 70% of credit union mortgage originations have been held in portfolio, with only 30% having been sold into the secondary market. According the Schenk, this means that credit unions “care deeply what ultimately happens to those loans—they care if the loans are paid back.”