Last week, I had the privilege of sitting in on one of the most dynamic and optimistic group of credit union senior managers I have met. The Credit Union Housing Roundtable is a virtual organization that focuses efforts on enhancing the movement’s ability to provide affordable housing options for members.
The group’s Big Hairy Audacious Goal is to move the credit union share of housing finance from a low several years ago of 2% to 10% by 2014.
If there were ever a group that one thought would be worried, it should be mortgage lenders. But in credit union after credit union, the report was that they are having their best year ever.
An example: a credit union that will report a negative bottom line of 20-30 basis points this year from loan losses, said that September was one of the best lending months in their history with over $100 million in loan originations, of which $35 million was in mortgage finance.
Another credit union reported holding a telethon with four other area credit unions, taking calls that aired on the local television station’s news programs, soliciting callers facing foreclosure to provide advice and financial help.
Spearheading a Recovery
The Roundtable group made three points that I think show why credit unions can lead the nation’s housing recovery. The New York Times columnist Joe Nocera described the decline in the housing prices as the “elephant in the room” confronting Washington policy makers. Even if national credit markets thaw, the core of the problem is still very local - helping the individual consumer pay their current mortgage or finance a new one.
The Roundtable’s three key points were:
- Credit unions are significant players in housing finance, managing 1.6 million in first mortgage notes and 2.75 million second mortgages. In addition to this $300 billion portfolio, credit unions service another $64 billion sold to the secondary market.
- Credit unions know exactly who is having difficulty paying their mortgages. Delinquent 1sts total $1.58 billion (average size $126,000) and seconds total $732 million (average size $34,000).
- The integrated credit union system of CLF, Corporates and natural person levels, is uniquely positioned to provide assistance quickly, with minimal risk, and with great impact. All the millions that flow in this system ultimately end up in only one place: a loan to a member.
The Advantage of Small and Local
Credit unions avoided the worst of the mortgage problems because, for virtually all, a mortgage loan was a way to build a long term relationship, not sell a transaction for a fee. Credit unions may be small in average size, but they are big in their local communities and fields of membership.
Most importantly, they are more than big enough, even if only several million dollars in assets, to help the average American homeowner.
This housing recovery will occur borrower by borrower, house by house, block by block, neighborhood by neighborhood until the whole community regains its economic self confidence. That is exactly the credit union way - doing what’s best, one member at a time.
Times like these are exactly why credit unions exist. By necessity, public policy will first focus on the highest elevations of the economy and the tallest of the skyscraper firms. It is credit unions that start in the grassroots. That is where this economic war will ultimately be won. If the Housing Roundtable’s enthusiasm and ideas are followed on through, credit unions will be the foot soldiers leading America’s economic recovery.