NEW YORK (12/17/07)--More than 40 credit union leaders joined the National Federation of Community Development Credit Unions Dec. 10 to discuss ways to overcome the mortgage crisis. The leaders attended a conference call titled, “Mortgage Meltdown: The Effects of Community Development Credit Unions (CDCUs) and Local Communities.” Brenda Weaver, director of the federation’s CDCU Mortgage Center LLC, and Greg Gemerer, federation director of policy research, began the call by discussing nationwide trends in the subprime crisis and comparing how those trends have affected CDCUs and conventional credit unions. The crisis that is hitting the U.S. is “the culmination of a perfect storm in the mortgage markets: the implosion of the subprime market, rising interest rates, a re-evaluation of real estate prices, economic downturns and predatory mortgages,” Weaver said. Gemerer shared some statistics:
* Year-to-date real estate delinquency ratios for the third quarter of 2007 are up 41 basis points (1.90% from 1.49%) for CDCUS; 28 basis points for all CUs (0.57% from 0.29%) and 57 basis points for banks (1.27% from 0.70%); and * CDCU net charge-offs increased by a small margin of 1.62% year-on-year in the third quarter, compared with 144% and 165% increases in net charge-offs for credit unions and banks.
“CDCUs continue to deal with their delinquencies effectively and manage to collect on the majority of their loans,” Gemerer said. A number of CDCUs also spoke about their experiences with the crisis. Gloria McLendon, loan officer at Faith Community United CU, Cleveland, Ohio, said she helped a member by refinancing a car loan, which allowed the member to refinance her mortgage with another lender. It’s also important to educate members and provide homeownership counseling, said Lynn Meyer, director of lending at O.U.R. FCU in Eugene, Ore. “We need to start refinancing people as soon as possible, before their rates reset and they become delinquent,” added Randy Chambers, federation vice-chairman and chief financial officer at Self-Help CU in Durham, N.C. Key recommendations that emerged from the call include: taking advantage of partnerships that leverage resources to help members; reaching out to borrowers before they are in trouble; and engaging in policy reform by sharing experiences with legislators and policymakers. “CDCUs often make loans that would be considered subprime,” said federation President/CEO Cliff Rosenthal. “The big difference is that unlike many realtors and banks that put people into loans they can’t really afford, CDCUs work with their members to ensure that they can meet their credit obligations. “The numbers show that while some low-income members may miss a payment from time to time, CDCUs tend to lend at much more favorable rates, provide financial education and homeownership counseling, and generally have more personal contact with their members, which leads to much lower instances of charge-offs. This is what it means to be a CDCU,” he concluded. The federation plans to offer a two-day seminar on affordable mortgage lending in Durham during the first quarter of 2008. For more information, use the link.