BRONX, N.Y. (12/18/08)--Bethex FCU, a $15 million-asset community development credit union (CDCU) serving more than 10,000 low-income residents throughout the Bronx, and other underserved areas in New York City, Mount Vernon and Yonkers, recently announced a series of comprehensive changes to its lending practices. The move comes in response to the recent mortgage meltdown and subsequent contraction in the credit markets, in which mainstream financial institutions have been tightening their lending standards across the board, but especially to low-income consumers whom they consider to be high-risk. Bethex is a niche lender focusing on low-credit borrowers, many of whom have previously been turned down by banks. The credit union specializes in lending to small and micro-business start-ups, particularly those run by women and minorities. In response to requests from its business borrowers, Bethex has recently modified its business loan policy to include an interest rate reduction for business and micro-enterprise members. In some cases, the credit union may lengthen the term of a loan, resulting in lower monthly payments while extending the life of the loan. As an approved Small Business Administration (SBA) lender, Bethex’s reduced interest rate is based on the SBA’s permitted rate of prime plus 2½% (4% + 2½% = 6½%). By monitoring this rate on a daily basis, Bethex is able to offer its members the best possible rate for each loan that is approved. Bethex loan officers do not give much weight to credit scores, or employ risk-based lending in their loan decisions. Instead, loan approval is based on knowledge of the community they serve and the relationships they have developed with their members over the years, Bethex said. Raising capital is frequently a challenge for financial institutions working with impoverished populations, but over the years Bethex has been fortunate in receiving support from New York State, New York City, and from the National Federation of Community Development Credit Unions, the CDCU said. Now that the economy has continued to deteriorate, that support may not be as readily available. Bethex FCU said it hopes that the government rescue plans will look holistically at the nation’s economic problems and support community-based financial institutions that can effectively deploy resources to low-income population. Bethex FCU was chartered in 1970 by the federal government and designated as a low-income credit union. Its organizers were women receiving Aid for Dependent Children.