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Former broker hails CUs for avoiding subprime loans

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HARRISBURG, Pa. (5/30/08)--A former mortgage broker praised credit unions for avoiding the subprime loan game at two Pennsylvania Credit Union Association lending council meetings in the state. The former broker, Paul Grabstanowicz, now a training consultant, was conducting training for the meetings on subprime lending solutions, said PCUA (Life is a Highway May 29). Subprime lending was profit-driven, he told the group. In hailing credit unions, he cited a 2004 letter issued by the National Credit Union Administration (NCUA) that warned credit unions about high risk subprime lending activities and said proper care is required in this area. The subprime fallout presents an huge opportunity for credit unions, he said. He urged credit unions to counsel first-time home buyers and offer subprime borrowers safe, conservative products when refinancing members out of subprime adjustable-rate mortgages (ARMs).

Foreclosures near military four times national average

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IRVINE, Calif. (5/30/08)--Foreclosures in U.S. towns where soldiers live are increasing at a pace four times faster than the national average, according to a survey by RealtyTrac Inc. of Irvine, Calif. Earlier this month, RealtyTrac released its April 2008 U.S. Foreclosure Market Report which indicates that foreclosure filings nationwide--default notices, auction sales notices and bank repossessions--were reported on 243,353 properties, a 4% increase from the previous month and nearly a 65% increase from April 2007. Foreclosure filings near military bases from January to April compared with a year earlier were up as high as 492%, according to the report. Among the leaders:
* Columbia, S.C.: 492% increase; * Woodbridge, Va.: 414%; * Triangle, Va.: 363%; * Oceanside, Calif.: 182%; * Norfolk, Va.: 155%; * Havelock, N.C.: 133%; * Carlsbad, Calif.: 131%; * Barstow, Calif.: 120%; * Columbus, Ga.: 102%; and * Twentynine Palms, Calif. 73%.
However, the trend has not affected some of the defense credit unions in these areas. AllSouth FCU, formerly Ft. Jackson FCU, a 406.4 million asset, Columbia, S.C.-based credit union, is not seeing any rise in foreclosures among its members, Thomas Boswell, AllSouth vice president of mortgage lending, told News Now. “The area we’re in is having some [foreclosure] issues, but our particular credit union is not,” Boswell said. “We’ve been extremely fortunate so far. Delinquencies have increased slightly, but we’ve only had one foreclosure all year in 2008.” Columbia, S, C., home to Fort Jackson, has seen a 492% rise in foreclosures so far this year compared with last year, according to RealtyTrac. Payday lenders often get blamed, but Boswell said it’s hard to pinpoint one specific issue for the rise in foreclosures. Payday lending is more of contributing factor rather than a root cause of the problem, he added. The Norfolk, Va., branch of Chartway FCU, a $1.3 billion asset, Virginia Beach-based credit union, has not seen a spike in foreclosures. “We’ve only had one foreclosure this year--a physician who lost his job,” Ron Burniske, Chartway president/CEO, told News Now. Payday lenders, although prevalent, have not impacted his credit union, Burniske added. “There are a tremendous number of payday lenders in our area that gravitate to military bases--we have three bases in our area,” he said. “We haven’t had any direct exposure to them. People who gravitate to payday lenders are not members of credit unions, because we have better services and prices than payday lenders. Most contacts with payday lenders are non-bank contacts; they’re usually not members of credit unions,” he said. The Center for Responsible Lending’s (CRL) research shows that the payday lending business model is designed to keep borrowers in debt, not to provide one-time assistance during a time of financial need. According to CRL's research, borrowers who receive five or more loans a year account for 90% of the lenders’ business. A CRL report shows that payday lenders cost American families $4.2 billion every year in predatory fees. CRL has not conducted any research that studies causation between payday lending and foreclosure rates, Sharon Reuss, CRL spokesperson, told News Now. “However, payday loans do drain wealth from people,” she said. Norfolk, Va., has seen a 155% rise in foreclosure filings, according to RealtyTrac. The Oceanside, Calif., branch of Pacific Marine CU, a $497.4 million asset, Camp Pendleton, Calif.-based credit union, told News Now it is a very conservative lender and has no foreclosures. Oceanside has experienced 182% rise in foreclosure filings this year compared with a year ago, RealtyTrac said.

Three join NYCUFs Board of Trustees

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ALBANY, N.Y. (5/30/08)--The New York Credit Union Foundation (NYCUF) has appointed three new individuals to its board of trustees. They are: Jeff Davenport, sales manager, CUNA Mutual Group; Shirley Jenkins, board member, Municipal CU, New York; and Christine Peters, Family First of NY FCU, Rochester, N.Y.
Davenport has been CUNA Mutual Group’s sales manager since 2001. He previously worked as president/CEO at County FCU, Caribou, Maine. He has worked for credit unions for more than 11 years. Peters served as chief financial officer of Family First of NY for eight years before being named CEO in January 2006. She has more than 14 years experience in the credit union industry. Jenkins has been a member of Municipal CU’s board of directors since 1983. She is the first female board president in the history of Municipal CU. Jenkins is currently the legislative chair. Other foundation trustees include:
* Chairperson Nancy Kasprzak-Whitmore, president/CEO, Niagara County FCU, Lockport.; * Vice Chair Bruno Sementilli, president/CEO, Quorum FCU, Purchase; * Secretary/treasurer Brian Clarke, chief financial officer, Bethpage (N.Y.) FCU; * Linda Bourgeois, CEO, UFirst FCU, Plattsburgh; * Arthur Field, president/CEO, First Heritage FCU, Painted Post; * John Gibardi, CEO, Entertainment Industries FCU, New York City.; * Michael Lotz, operations manager, British Airways EFCU, East Elmhurst; * James Mack, business development executive, Sunmark FCU, Latham; * William J. Mellin, president/CEO, New York State Credit Union League; * Vicki O’Neill, president/CEO, ACMG FCU, Solvay; * John Prumo, president/CEO, GPO FCU, New Hartford; * James Stracuzzi, president/CEO, CCSD FCU, Elmira Heights; and * Dirck Van Deusen, senior vice president, corporate relations, Empire Corporate FCU, Spring Valley.

CU System briefs (05/29/2008)

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* LAVAL, Quebec (5/30/08)--Desjardins Group, the largest integrated cooperative financial group in Canada, announced it will be the official partner of the Quebec Soccer Federation for three years. The partnership agreement extends support from caisses (credit unions) to local and regional soccer associations across Quebec. Desjardins is also sponsor for the senior and U14 male and female categories of the Quebec Elite Soccer League. "Just like cooperation, soccer, as any team sport, is a sport where solidarity and mutual aid are key ingredients for success," said Monique F. Leroux, president/CEO of Desjardins Group (CNW Telbec May 21) … * PORTSMOUTH, N.H. (5/30/08)--Northeast CU (NECU) is encouraging people to save at least some of their Economic Stimulus Checks by opening a new savings account. Its new Silver Lining Savings account rewards savers with an annual percentage yield of 4.09% on the first $500. The variable-rate account has no monthly maintenance, minimum balance or withdrawal fees, and offers electronic funding and automatic deposit transfers from other accounts. "We believe it's essential for people to be educated about the necessity of having a savings account they can fall back on in these tough economic times," said Peter Kavalauskas, president/CEO … * MILWAUKEE--(5/30/08)--Empower CU and its board have announced a bonus dividend of roughly $150,000--the first dividend in the credit union's history. "Empower CU is successful because of our borrowers and savers, so we wanted to reward our member-owners," said Jennifer Schilling, president of the $133 million asset credit union. "With gas and food prices going up so dramatically over the past few months, we know these funds will assist our members, no matter what state of life they are in." … * CHANDLER, Ariz. (5/30/08)--For the second consecutive year, First CU and the Volunteer Income Tax Assistance (VITA) program partnered to provide low- to moderate-income individuals and families free tax preparation and filing assistance. The credit union volunteers helped return $157,368 to the pockets of area residents. "They were very grateful for the free help. Called us lifesavers," said Jane Hacker, a VITA volunteer and First CU branch manager. The $510 million asset credit union also offered a free opening deposit to those using the VITA program …

Counterfeit checks drawn on Members Exchange CU

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JACKSON, Miss. (5/30/08)--A series of counterfeit teller checks drawn on a Jackson, Miss.-based credit union is circulating in several states, according to the Mississippi Credit Union Association. The checks are drawn on Member's Exchange CU, a $48 million asset credit union. "Scam letters were mailed, along with a counterfeit check, to 'lucky' individuals throughout the country," said Sonny Green, vice president of the association. The checks are for $4,965 and closely mimic MECU's regular teller checks. The routing number, account number and check sequence are valid. However, the logo, while similar, does not exactly match MECU's logo. The word "CERTIFIED" appears as if it was typed on the check by a typewriter. All the checks are signed by the same person, Daniel L. Molinaro. The address on the check is correct, but no phone number is listed. So far, individuals in Kentucky, Arizona and Ohio have contacted MECU about receiving the checks.

CUs can help car buyers steer clear of predatory auto loans

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WASHINGTON (5/30/08)--Credit union auto lenders are invited to participate in a summit that will share new research featuring lending models that “Help Car Buyers Steer Clear of Predatory Auto Loans.” Both the research and the summit will be presented by three national organizations aligned to help credit unions serve working families with low wealth and modest incomes: the National Credit Union Foundation (NCUF), the Annie E. Casey Foundation, and the Aspen Institute. The “Steer Clear” Auto Lending Summit will take place Tuesday, July 22, from 10 a.m. – 2 p.m. at Credit Union House on Capitol Hill in Washington. The first 40 credit union lenders who RSVP by June 13 will receive a preview of the research report: Credit Unions Help Car Buyers Steer Clear of Predatory Loans. At the summit, participants will discuss ideas on anti-predatory lending models that could best be adapted in credit unions. Participants’ input will help finalize the report, which will be shared with the credit union movement through NCUF’s signature program, REAL Solutions. “Credit unions serve only 5% of the non-prime auto loan market,” noted REAL Solutions National Program Director Lois Kitsch. “This new research will offer proven models that credit unions can use to serve this market in ways that are economically viable.” To RSVP, e-mail lkitsch@ncuf.coop. For more information, use the Resource Link or call 800-356-9655, ext. 6770.

Study Credit crunch opening doors for FIs

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BOSTON, Mass. (5/30/08)--Market volatility and the credit crunch are opening doors for financial institutions in two areas, according to studies presented Thursday at the 2008 TowerGroup Financial Services Business & Technology Conference and Exhibition in Boston. The areas are payments--especially related to the demise of paper checks--and securities and investments. The credit crunch is indirectly helping accelerate the decline of paper checks, noted Theodore Iacobuzio, managing director and practice leader of TowerGroup's payments. "The absolute decline in the use of paper checks is one of the great banking headlines of the current decade, and the current credit crunch is playing a key role in driving financial institutions to try to accelerate this trend toward corporate clients," said Iacobuzio. "With consumers still in trouble on the credit front, credit card issuers are ready to move on getting more B2B (business to business) payments off of checks and onto commercial cards," he said, adding the cards are attractive given typically large dollar purchases and 50% lower loss rates than consumer cards. Card issuers naturally will migrate to less risky instruments that derive income from transactions and fees, rather than interest, he said. "Yet a key question will be how long lower loss rates and higher fee income can last, Iacobuzio added. In the securities and investments arena, the securitization of consumer financial products has forever linked Wall Street and Main Street, eliminating "silos" that once defined the financial services landscape, said Rob Hegarty, managing director of TowerGroup's securities and investments). "The financial system has become completely interdependent, and if there is risk to be taken, there is 'insurance' to be sold in the form of structured products," Hegarty said. This means that market contractions will come faster and sharper, as will subsequent rebounds, he said. Opportunities for financial institutions exist in the increasing role of Sovereign Wealth Funds and the rise of trading volumes. Hegarty said TowerGroup predicted 2007's hike in trading volumes and expects to see transaction spikes become debilitating to some market players in 2008. Those who invest in the "industrial strength" infrastructure needed for the new "norm" of trading volumes will see strong pay-off during the next year, Hegarty said. The conference, themed "Charting Your Course for Success," ends today.

Collections the CU way topic of best practices report

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MADISON, Wis. (5/30/08)--Experts agree that the best strategies for credit collections focus on the process rather than the numbers. Establishing a strong rapport with members, nurturing trust, communicating with respect, and working toward a payment solution is preferable to being concerned only with numbers. Specific process-focused collections strategies are offered in a new best practices report from the Credit Union National Association (CUNA). As the economy struggles and delinquencies rise, Credit Union Magazine Best Practices: Collections the Credit Union Way describes the strategies of eight credit unions for weathering the economic storm. These credit unions--ranging from $23 million to $3 billion in assets--collectively recovered nearly $2.7 million in charge-offs and average a 25.7% recovery rate. Collectors who treat members with compassion and who help craft real solutions to payment problems are the ones who will be paid first when members’ finances improve, said Craig Sacia, manager of credit services at the $542 million asset Altra FCU in LaCrosse, Wis. “If we’re the ones showing them we’re concerned for their well-being, we’re going to make a friend for life if we turn their situation around,” Sacia said. “We want to be the one creditor they hold on to after the storm passes. And if they think we’re nasty to work with, what are our chances of being the last creditor standing?” Best practices reports on succession planning, serving members of modest means, growing youth membership, business services providers, consumer lending, credit counseling, disaster recovery, risk-based lending, and more also are available. For more information, use the link.

League Arkansas CUs strong well-regulated fed. insured

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LITTLE ROCK, Ark. (5/30/08)--Arkansas credit unions are among the strongest in the country, the Arkansas Credit Union League said yesterday. “The nearly 300,000 consumers who are members of Arkansas credit unions enjoy saving their hard-earned money and borrowing for their needs,” said Reta Kahley, president of the Arkansas league. Arkansas has 68 credit unions, with more than $1.7 billion in assets. The ratio of reserves to average assets, or net worth, is about 16%. It’s “well ahead of even the national credit union net worth ratio of just more than 11%,” Kahley said. Credit unions in Arkansas and nationwide are among the most highly regulated financial institutions, she added. All deposits in state credit unions are insured by the National Credit Union Administration, up to $100,000. “Not one penny of insured savings has ever been lost by a member of a federally insured credit union,” Kahley concluded. Kahley made the comments upon learning that a newspaper in the state erroneously reported that two credit unions had filed for Chapter 13 bankruptcy. The newspaper ran a correction earlier this week. (See “Newspaper’s error prompts problems at two Arkansas CUs”)

Patelco CU agrees to help stabilize Sterlent CU

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SAN FRANCISCO, Calif. (5/30/08)--Patelco CU has stepped in to help the $100 million asset Sterlent CU, which has experienced credit quality issues the past year from home equity loan defaults. Patelco said the state regulator, the California Department of Financial Institutions, has been aware of Sterlent's problems and had been communicating with Patelco up to its move to assist. The Pleasanton, Calif.-based Sterlent reported a net loss of $5.5 million during the first quarter of 2008. Its credit quality issues stem from a home equity loan program it implemented in 2003. Current management ended the program in late 2006, said a press release from Patelco. "We share common roots, credit unions built by members from the telephone industry, so it isn't surprising we come together to help when problems arise," said Andy Hunter, CEO at the $4.1 billion asset Patelco, California's fourth-largest credit union. "As a much larger and more highly capitalized credit union, Patelco has the depth to provide Sterlent with additional experienced support and resources sorely needed in these turbulent times," Hunter said. "Patelco's role right now is to assist Sterlent's management team in their continued efforts to provide stable member services and stem future losses wherever possible, and that is what we intend to do," Hunter said. "I have every confidence that by working together, Patelco and Sterlent will focus on meeting the members' needs, as always." The announcement came less than a week after Patelco announced it will buy another credit union with home equity loan default problems, the Concord, Calif.-based Cal State 9. Both Cal State 9 and Sterlent suffered setbacks linked to the sinking residential real estate market in the area.

New York GAC shares CU difference with state lawmakers

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LATHAM, N.Y. (5/30/08)--New York credit unions participated in 81 "Hike the Hill" visits in Albany, N.Y. last week to promote progressive credit union legislative issues to lawmakers during the New York State Credit Union League's annual Governmental Affairs Conference. They asked state lawmakers to:
* Advance municipal deposits legislation; * Support a special additional mortgage recording tax exemption for state-chartered credit unions; and * Recognize the need for financial education in high schools.
They
New York credit unions visited state lawmakers during the New York State Credit Union League's annual Governmental Affairs Conference last week. From left: John C. Gibardi, CEO, Entertainment Industries FCU; State Assembly Banks Chair Darryl C. Towns (D-Metropolitan); William J. Mellin, league president/CEO; and Lou Jimenez, CEO, Montauk CU. (Photo provided by the New York State Credit Union League)
presented information packets about credit unions, memorandums of support on favorable credit union issues, Project ZIP Code data, the league's second annual Member Outreach & Reinvestment Endeavor (MORE) Report, which documents efforts by New York state-chartered credit unions to fulfill their social mission; and the "Little Guy" from the Credit Union National Association's campaign. More than 100 elected officials and/or their staff attended the event's legislative reception. Attendees heard keynote addresses by John Parfrey, director of the NEFE High School Financial Planning Program; Bob Bellafiore, senior partner, Eric Mower and Associates, who update the group on state politics; and Steven Greenberg, founder, Greenberg Public Relations. Parfrey acknowledged New York credit unions' support of the NEFE's financial literacy efforts with youth. Bellafiore and Greenberg spoke about the state government and the presidential election.

Newspapers error prompts problems at two Arkansas CUs

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LITTLE ROCK, Ark. (5/30/08)--Two Arkansas credit unions were incorrectly listed in a local newspaper’s bankruptcy column, triggering a lot of headaches for the credit union’s employees, members and board members. On Monday morning, Linda Jeffrey, president, TruService Community FCU in Little Rock, picked up a copy of the local newspaper--and what she saw nearly gave her a heart attack. “I couldn’t believe it,” Jeffrey told News Now. “The Arkansas Democrat-Gazette had listed TruService in the bankruptcy section.” After checking the national bankruptcy site, Jeffrey saw that the error was made by the newspaper. The Democrat also incorrectly listed Crossett (Ark.) Paper Mills Employees FCU in the bankruptcy section. Five minutes after seeing the bankruptcy listing, Jeffrey received a call from a board member, who said he had been receiving calls at his home from worried members. Roughly 50 members called the credit union about the error. “There were people coming into the lobby,” Jeffrey said. “It was pretty crazy.” TruService didn’t lose any deposits over the matter--but Crossett Paper Mills Employees FCU did. The credit union has identified four withdrawals directly related to the erroneous article. A total of $190,000 was withdrawn on Tuesday, and $253,000 was withdrawn Wednesday, Crossett Paper Mill Employees FCU President Ed Gilbert told News Now. About 400 members called the Crossett credit union regarding the error. On Monday alone, the credit union’s staff and board received more than 100 calls, Gilbert said. The credit union is still receiving intermittent calls. The town of Crossett has a population of about 6,000--so word spread fast, Gilbert said. “It’s a very tight community. We’re a little unique in that respect, and we suffered a lot more stress because of that,” he said. Gilbert thanked his staff members, board members, and business owners in the community for their help. The brother of a credit union employee works at a local radio station, and he aired a breaking news story on Monday regarding the erroneous article even though the station had scheduled programming, Gilbert said. He also invited Gilbert in for an early morning interview Tuesday, which was replayed throughout the day. Another area radio station disseminated information to clear up concerns. A local newspaper reporter interviewed Gilbert and published an article about the matter, he said. Local paper mills let their employees know that the credit union was not filing for bankruptcy. The local chamber of commerce also sent out an e-mail, Gilbert said. The Democrat has run two retractions, including one in the business section. The first retraction was “tiny,” Jeffrey said. “Even I missed it.” The Ashley County Ledger reported the correction, even though the newspaper did not erroneously report the bankruptcy. Jeffrey has met with the newspaper’s managing editor about the error. It is not known exactly how the error occurred, but Jeffrey thinks the Democrat should publish a story about the credit union’s long success record. “We recognize that mistakes happen,” she said. “But by one strike of a pen, they tarnished our reputation.” Gilbert also agreed the mistake was “unfortunate,” but noted the impact it had. “Anybody can make a mistake,” he said. “But there was negligence in the editing.” The Arkansas Credit Union League sent its attorney to the newspaper and at the league’s request, it printed the second retraction, said Reta Kahley, league president/CEO. The league also is disseminating information to media about the safety and soundness of credit unions in the state. (See “League: Arkansas CUs strong, well-regulated, fed-insured") The printing error occurred two weeks after the Federal Deposit Insurance Corp. closed a bank in Northwest Arkansas, Kahley said.