.jpg)
This report examines why Credit Unions are losing home loans at a record pace (and what to do about it).
Over the past few years, U.S. credit unions have faced intensified competition from non-bank lenders (independent mortgage companies and fintechs) in the home lending market. Non-bank lenders now dominate originations in home purchase loans, refinances, and are encroaching on home equity lending. This report examines where homeowners are getting mortgage leads, how non-bank lenders are outperforming credit unions in lead acquisition and conversion, and recent market share trends for home loans, second mortgages (home equity lending), and refinancing. We also analyze the impact of digital mortgage experiences on customer acquisition and retention, and provide key takeaways with recommendations for credit union executives to compete more effectively.
Homebuyers today increasingly turn to digital channels and online platforms to find mortgage options. Surveys show that a strong majority of recent homebuyers prefer to use online methods when selecting a lender – about 71% of buyers said they primarily went online to find a mortgage lender (versus 28% who relied mainly on in-person or phone interactions) [fanniemae.com]. Borrowers frequently begin with internet searches, comparison sites, or lender marketplaces. Aggregator platforms like LendingTree, Zillow, and Bankrate funnel thousands of lead inquiries to participating lenders, giving tech-savvy non-banks broad reach into consumers’ mortgage shopping.
At the same time, referral networks remain important. Many first-time or less-experienced borrowers pick lenders based on referrals from real estate agents, family, or friends [mortgagetech.ice.com].
Non-bank lenders often cultivate relationships with realtors and homebuilders to capture these purchase loan referrals. For example, “purchase-focused” independent lenders rely on local loan officers with strong realtor ties, helping them secure a steady stream of homebuyer leads [mckinsey.com]. In contrast, credit unions tend to rely on their existing member base and branch contacts for mortgage leads, which may limit their exposure to new homebuyers who are shopping broadly online.
Another major lead source is direct digital marketing by fintech lenders. Leading non-banks invest heavily in online advertising, social media, and quick pre-qualification apps to attract consumers. Their websites often offer instant rate quotes and easy online applications, capturing consumer interest at the top of the funnel. In 2022, Rocket Mortgage (a prominent non-bank fintech) spent over a billion dollars on marketing, leveraging its brand and digital presence to drive mortgage inquiries (significantly more than most credit unions can spend) [stratmorgroup.com] [mckinsey.com].
By meeting borrowers in the digital channels they frequent, non-banks ensure they are on the borrower’s consideration list early. Credit unions have been slower to adopt aggressive online lead generation strategies, sometimes causing them to miss out on borrowers who begin their lender search on a smartphone or computer.
Finally, traditional bank referrals have dwindled in importance as big banks pull back from mortgages. Many large banks have reduced mortgage marketing to their checking account customers [mckinsey.com].
This has opened opportunities for non-bank lenders (and to some extent, credit unions) to step in. However, credit unions still report that a sizeable portion of their mortgage business comes from cross-selling to members who already use the credit union for other products. The challenge is that today’s borrowers are far less likely to simply take a mortgage from their primary financial institution without shopping around – and that shopping increasingly happens online or via realtor recommendations where non-bank lenders are highly visible.
Non-bank mortgage lenders have outpaced credit unions in capturing and converting leads thanks to superior digital marketing and more streamlined sales processes. A key advantage is speed: independent mortgage companies are often quick to respond to inquiries and process applications, whereas “slow response times and cumbersome document requests” at traditional institutions (including many credit unions) hurt borrower satisfaction [mckinsey.com].
Studies find that when borrowers inquire about a loan, fast follow-up is critical – customer satisfaction drops significantly if a lender has to ask for extra documents more than twice [mckinsey.com]. Non-bank lenders leverage automation (e.g. instant document verification, online portals) to minimize back-and-forth, converting leads to applications efficiently.
Another area where non-banks excel is dedicated sales infrastructure. Consumer-direct mortgage companies use call centers and lead management technology to aggressively pursue every lead – for example, triggering an outbound call within minutes of a borrower submitting an online rate request. They also run continuous marketing campaigns (email, text, and phone) to nurture leads. By contrast, many credit unions have smaller mortgage teams that juggle multiple roles, and they may not chase leads with the same intensity. As one industry analysis noted, banks and credit unions often “do not staff quickly enough to handle volume” during booms, leading to much longer cycle times than non-banks and lost opportunities on purchase transactions [stratmorgroup.com].
Non-bank lenders are also highly adept at realtor partnerships and retail presence. They employ armies of loan officers who network with realtors, builders, and local brokers to drive referrals. These relationship-based channels are vital in the purchase market. McKinsey reports that independent purchase-focused lenders (those emphasizing realtor/LO networks) grew their share of purchase originations from 24% in 2018 to about 32% by 2023 [mckinsey.com]. This suggests they’ve been successful in building pipelines of borrowers through partner referrals. Credit unions, even though community-oriented, often lack comparable nationwide realtor networks; if a homebuyer isn’t already a member, a credit union is less likely to be recommended as the first stop for a mortgage.
Importantly, customer experience has become a differentiator in conversion. Non-banks have invested in user-friendly mobile apps and web portals that guide borrowers through applications step-by-step. Many offer a “high-tech, high-touch” approach – borrowers get the convenience of digital tools plus on-demand help from loan officers. This model resonates with consumers: lenders who maintained staffing and invested in digital process improvements during the recent volatile market “are crushing their competitors on customer satisfaction” [inman.com].
In other words, a smooth digital experience combined with personal support translates into higher lead-to-loan conversion rates. Credit unions historically pride themselves on personal service, but if their digital interface is lacking (for example, no online application or clunky websites), modern borrowers may not even give them a chance to deliver that personal touch.
Additionally, non-bank lenders often provide more flexible products or credit underwriting that attract leads. Many fintech-style lenders use alternative data or automated underwriting to approve borrowers faster or qualify those with non-traditional profiles. During the refinance boom of 2020–2021, non-banks aggressively marketed no-closing-cost refis and remote e-closings, drawing huge volumes while some credit unions struggled to scale up. The result was non-banks capturing outsized refi business by being more agile and marketing-savvy. In short, non-bank lenders’ combination of marketing reach, rapid response, realtor alliances, and digital-first processes has allowed them to outperform credit unions in both generating mortgage leads and converting them into closed loans [mckinsey.com] [inman.com].
The numbers underscore how significantly non-bank lenders have overtaken credit unions (and banks) in market share. According to federal Home Mortgage Disclosure Act (HMDA) data, independent mortgage companies now originate roughly two-thirds of all home loans. In 2023, non-depository lenders accounted for 63.1% of first-lien home purchase originations, up from about 60% in 2022 [consumerfinance.gov]. Their grip on refinancing is even tighter – non-banks made 67.1% of all first-lien refinance loans in 2023, an increase from 62% the year prior [consumerfinance.gov].
This continues a long-running trend of non-bank growth. Nonbanks’ share of agency-backed mortgages has been rising steadily for a decade, reaching ~80% of all agency (Fannie/Freddie/FHA/VA) loans by late 2023 [urban.org]. For government-insured loans in particular, non-banks dominate (over 90% of FHA/VA loans are now from non-banks) [urban.org]. Non-bank lenders’ market share has climbed steadily over the past decade. The chart shows HMDA-reported mortgage originations split between banks/credit unions (blue line) and non-bank lenders (green line). Non-banks have surged from about 24% market share in 2010 to 63% by 2021 [stratmorgroup.com].
Credit unions, as part of the broader category of depository institutions, hold only a minor slice of the mortgage market. In 2023, all credit unions combined handled roughly 14% of U.S. mortgage applications, up from about 9–10% during the 2020–2021 boom. [cutimes.com]. (Their share rebounded slightly after 2021 as many big banks pulled back from mortgages more sharply, while credit unions continued lending [cutimes.com].) Even with that uptick, credit unions’ share of originations remains relatively small – on the order of 10% of funded loans – versus the ~65% or more now taken by non-bank lenders [consumerfinance.gov].
In dollar volume, the gap is enormous: independent mortgage companies originated over two-thirds of loans in 2023, whereas credit unions (often smaller-balance lenders) likely accounted for well under 10% of total mortgage dollars.
The nation’s largest credit union, Navy Federal, was a top-10 mortgage lender by application volume in 2023 [cutimes.com], yet non-bank giants like Rocket Mortgage and United Wholesale Mortgage each produced multiple times the volume of all credit unions put together.
Market share trends during the refinance boom and subsequent cooldown illustrate the competitive dynamics. In 2020–2021, historically low interest rates triggered a refinancing tsunami – and non-bank lenders seized the moment, scaling up call centers and marketing to capture refinances at a far faster pace than most credit unions. Consequently, credit unions’ overall market share dipped during the 2020–21 surge (they had only ~9% of applications in those years) [cutimes.com]. When rates rose sharply in 2022 and refi volume collapsed, some non-banks retrenched or went out of business, and banks/credit unions saw a relative uptick in share. For example, in 2022 the non-bank share of funded loans actually dipped to ~51% (from ~61% in 2021) as banks picked up some slack [spglobal.com]. But this shift was short-lived. By 2023, with many banks (and a few large credit unions) exiting or downsizing their mortgage operations, non-banks quickly regained ground [insidemortgagefinance.com]. The latest HMDA data confirm that non-bank lenders not only kept their dominant position but expanded it further in 2023 [consumerfinance.gov].
In sum, credit unions are losing ground to non-bank lenders in the core mortgage market. Non-banks’ share of home purchase loans climbed to nearly 70% in 2023
[nationalmortgageprofessional.com], whereas credit unions—despite serving 135+ million Americans—remain a relatively small player in home finance. Even in refinances, which traditionally were a strength for depository lenders leveraging their customer base, independent mortgage companies now originate roughly two out of every three refi loans [consumerfinance.gov]. These market share realities underscore the need for credit unions to rethink how they compete in mortgage lending.
One area where credit unions historically have had an edge is home equity lending – both Home Equity Lines of Credit (HELOCs) and closed-end second mortgages. Credit unions often offer attractive rates on HELOCs to their members and have been strong in this category. In fact, during the recent high-rate environment, credit unions grew their share in home equity lending while other lenders pulled back. A national analysis found that credit unions’ share of home equity loans climbed from about 29% in 2018 to nearly 40% of the market by 2023 [ncrc.org]. This surge was partly because many non-bank lenders retrenched on HELOC offerings when interest rates spiked. Banks also tightened home equity credit after the pandemic. Borrowers, however, were eager to tap equity without refinancing their low-rate first mortgages, leading them to HELOC providers – and credit unions stepped up to meet that demand in many cases.
Yet, even in the home equity arena, competition from non-banks is mounting. Fintech lenders have started targeting HELOCs with fully online processes and quick approvals. For example, Figure Lending, a fintech non-bank, became one of the top 10 HELOC originators nationwide in 2023 (over 24,000 lines opened)
[thetruthaboutmortgage.com]. Other mortgage companies, like United Wholesale Mortgage and loanDepot, also rolled out home equity loan products to compete in this space. While traditional banks still lead in HELOC volume (Bank of America alone had about a 6% market share in 2023), the presence of non-bank lenders in the top rankings is a warning sign for credit unions.
Credit unions currently punch above their weight in second mortgages – several large credit unions (State Employees’ CU, Navy Federal, etc.) were among the top 10 HELOC lenders in 2023. Their focus on member service and often lower fees make them appealing for equity loans. However, to retain this advantage, credit unions will need to match the convenience and speed that fintech players are offering.
Borrowers increasingly expect to be able to apply for a HELOC online and get a decision quickly, rather than the slower, paper-intensive processes some credit unions still use. Moreover, as non-bank lenders aggressively market home equity loans (especially for debt consolidation or home improvements), credit unions risk losing younger members who might opt for a slick app-based HELOC from a fintech over a more cumbersome experience at a branch.
In summary, credit unions have held relatively strong in home equity lending even as they lost share in first mortgages. But the competitive moat is narrowing. The next frontier of competition is digital home equity offerings [housingwire.com]. Without question, non-banks will apply the same playbook in second-lien lending that they used in first mortgages – leveraging technology and marketing to win customers. Credit unions should view their current ~40% share in home equity lending [ncrc.org] as an opportunity and a vulnerability: it’s a foothold that could erode if they don’t continue innovating.
The mortgage industry’s evolution makes one thing clear: the digital experience is now pivotal in attracting and retaining customers. Modern borrowers expect an easy, transparent process. Lenders who deliver a superior digital mortgage experience are winning business, while those who lag are losing market share
[inman.com]. This has direct implications for credit unions, which have traditionally emphasized in-person service and may be slower in tech adoption.
Digital influence is evident at every stage of the borrower journey. As noted, a majority of homebuyers find and research lenders online[fanniemae.com]. If a credit union’s mortgage webpage is hard to find or not user-friendly, potential borrowers might never engage at all. Once the borrower applies, the ease of the application process can make or break the deal. Borrowers increasingly prefer to complete applications and upload documents online at their convenience. In Q1 2024, 86% of recent homebuyers said they would rather complete the mortgage application mainly online than in person
[fanniemae.com]. They cited speed and simplicity – 75% said a digital process “accelerates the process” and 71% said it “makes the process easier,” according to a Fannie Mae survey [fanniemae.com]. Non-bank lenders have capitalized on this by offering slick mobile apps, e-signature for disclosures, and automated income/asset verification. Many credit unions, on the other hand, only began offering fully online mortgage applications in recent years, and some still require physical paperwork or in-branch visits for parts of the process. This gap in convenience can turn tech-savvy borrowers away.
Beyond acquisition, digital experience heavily influences customer satisfaction and retention. J.D. Power’s annual studies have found that lenders who invest in streamlined digital processes earn significantly higher satisfaction scores [inman.com]. For example, lenders that remained well-staffed and kept their tech updated during the 2022–2023 market downturn outperformed competitors in customer satisfaction by helping borrowers navigate challenges smoothly [inman.com].
Key pain points that digital tools can address include timely status updates, reducing redundant information requests, and enabling easy communication. Borrowers value the ability to track their loan progress online and get instant answers – if a credit union can’t provide that, borrowers might not come back for their next loan or might not refer others. In fact, non-bank lenders have dramatically higher customer retention in servicing (often retaining 3-4x more refinance customers than banks/credit unions do) partly because they offer better post-closing digital engagement and refi targeting [stratmorgroup.com].
Every time a credit union’s member refinances with a Rocket Mortgage (instead of the credit union) because Rocket’s app made it simpler, the credit union loses not just that loan, but potentially the entire relationship. - Chase Neinken, Chimney CRO
That said, digital convenience alone isn’t enough – it must be paired with personal support. Most borrowers don’t want a fully automated experience with no human interaction [mortgagetech.ice.com]. Only about 9% said they preferred an all-digital, self-service mortgage process [mortgagetech.ice.com].
The majority appreciate having a loan officer or representative available for questions, even as they use online tools. This is where credit unions can excel: combining high-tech with high-touch. A great digital platform augmented by the credit union’s trustworthy, member-focused guidance can be a winning formula. Many independent mortgage fintechs are trying to strike this balance, and credit unions must do the same. In short, a state-of-the-art digital mortgage experience is no longer a “nice-to-have” – it’s a must-have for customer acquisition and loyalty, and it’s an area where credit unions cannot afford to fall behind.
For credit union executives, the trends above highlight an urgent need to adapt strategies in order to compete with non-bank lenders. Below are key takeaways and actionable recommendations:
By executing on these strategies, credit unions can begin to narrow the gap with non-bank lenders. The fundamental strengths of credit unions – community ties, member trust, and personalized service – are valuable assets, but they must be amplified by competitive technology and smart marketing. Non-bank lenders have captured market share by meeting borrowers where they are (online) and giving them what they want (speed and simplicity) [mckinsey.com]. Credit unions can reclaim ground by doing the same, in a way that aligns with their mission. In an environment where nearly 7 in 10 mortgages are made by independent lenders [nationalmortgageprofessional.com], standing still is not an option.
With deliberate action to improve digital capabilities and customer engagement, credit unions can remain relevant and even thrive in the home lending market of the future.
The battle for homeowners is happening right now, and credit unions that don’t act will continue to lose market share to non-bank lenders. Chimney empowers your credit union to identify homeowners across your member base in real time using live property data—giving you the insight needed to proactively engage members before they seek financing elsewhere.
With MyHomeTracker, your members can effortlessly track their home’s value, monitor available equity, access financial education, and receive personalized loan offers—all within your banking app. This keeps homeowners engaged with your credit union, positioning you as their trusted financial partner for mortgages, home equity loans, and refinancing before they turn to fintech competitors.
Still not convinced?
Check out this Chimney Client Benchmark Data Report: What to Expect with Loan Production Benchmarks.
Let’s talk about how Chimney can help your credit union compete and win. Reach out today to schedule a demo.
.jpg)
.jpg)