WASHINGTON (3/30/09)—The National Federation of Community Development Credit Unions (Federation) reiterated its decade-long opposition to extending the Community Reinvest Act (CRA) to credit unions, while backing its application to mortgage banks, securities firms, insurance companies, and other entities. Proposed legislation to expand the reach of CRA requirements specifically exempts low-income designated credit unions, such as community development credit unions (CDCUs), from coming under CRA, a fact the Federation noted in its position statement. However, the group underscored the exemption is appropriate for all credit unions because of financial cooperatives’ fundamental differences from other mortgage lenders, which include:
* Credit unions are non-profit, member-owned cooperatives. * They have no outside shareholders who demand ever-increasing quarter-over-quarter profits. * Excessive executive compensation has not been an issue with credit unions. * Credit unions have, for the most part, maintained a direct relationship with their borrowers, enabling many to rapidly restructure and modify mortgage loans.
“This contrasts markedly with institutions which are intimately and inextricably bound in the complex chain of securitization that has greatly hindered efforts to untangle the foreclosure crisis,” the Federation position paper said. It added, “In short, we believe that the basic philosophic and structural principles of the credit union movement can well serve as a template for the restructuring of the entire financial system.” The position paper emphatically endorsed CRA, saying it has been “immensely important to the revitalization of our nation’s distressed areas.” “We believe that CRA must, indeed, be expanded and modernized so that it reflects the migration of vast amounts of money to entities that are not subject to reinvestment regulations,” the Federation said. The Federation represents more than 200 credit unions in 46 states that serve low-income urban, rural, and reservation-based communities. They range from the smallest of depositories, with less than $1 million in assets, to credit unions with more than $1 billion in assets, which—the Federation noted--nonetheless serve predominantly low-income communities. The legislation referred to by the Federation is a bill introduced March 12 by Rep. Eddie Bernice Johnson (D-Tex.). The Credit Union National Association (CUNA) strongly opposes the application of CRA requirements to credit unions. CUNA Senior Vice President of Legislative Affairs John Magill has said: "CRA was enacted because banks were redlining—drawing circles around communities to which they would not lend. All available data suggests that credit unions, on the other hand, are out there lending to their members—even and especially in these tough times."