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Calif. CUs healthy despite housing impact says league
RANCHO CUCAMONGA, Calif. (5/15/08)--California's credit unions are well-equipped to weather the downturns in the state's and nation's economy, says the California Credit Union League. Because of a few high-profile losses, credit unions elsewhere may get a skewed view of credit unions' economic status in the state. But credit unions overall in the state are healthy. "Credit unions in California remain well-capitalized and therefore are equipped to handle the economic downturns," said Terrin Griffiths, league economist and analyst. Capital at the state's credit unions for year-end 2007 was at 10.94%, compared with 10.99% at year-end 2006, she told News Now. "We haven't seen an erosion of capital in the state's credit unions." Chris Collver, league regulatory and legislative analyst, said "delinquencies to total loans have increased from 2006 to 2007 but are still well below 1%." In 2007, delinquencies were 0.85%, compared with 0.47% in 2006. The National Credit Union Administration historically has considered 1.25%-1.50% and under as acceptable, he added. California has more than 500 credit unions. A few credit unions have seen widespread coverage in the news because of problems with home equity loans failing as the housing market boom state struggles with the nation's housing market crisis. "The other credit unions that are in the news are there not because they're in the trouble but because they're taking corrective steps to move their loan delinquencies to the allowance for loan losses side, which they are supposed to do. That's why credit unions have capital," Collver told News Now. Since the state is in a housing crisis, why aren't more California credit unions affected? "Credit unions have different, more stringent lending standards," said Griffiths. "During the boom in the housing market, credit unions offered a wide variety of affordable loans but they didn't relax (lending) standards." They weren't making as many loans, which may not be good from a growth perspective at that time, but now their standards are serving them well, she said. Collver noted that CEOs have told the league their credit unions are taking losses because of bad loans given to members by other financial institutions, whether in the form of credit cards or loans the members got somewhere else and that were not in the best interest of the members. "A ripple effect has been felt by some credit unions," he said. True to their nature, credit unions are reaching out to help those members. "Credit unions are extending their outreach to help members and nonmembers and making them aware of their products. They've invited members to review their line of products," said Griffiths. "Because housing prices are declining in California, however, it is hard to work with some of the (original) loans. Credit unions can offer help for those going into foreclosure or who need to sell their homes. They can make loans to help the members buy time. They try to alleviate the stress that is part of being the homeowner," she said. The point is, says Collver, "credit unions are not engaged in abusive lending tactics, and they're well-capitalized and continue to be." That's true for credit unions both in the state and in the nation, he said. "In the U.S., it's the same story, with credit unions in a very healthy position."
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