ARLINGTON, Va. — Credit unions are shocking the experts by continuing to make loans.
"We keep putting out the message that credit unions are open for business, that credit unions are still lending, and they just look at us with disbelief," said Fred Becker, CEO of NAFCU. "It's the opposite of what they're hearing from all of the other financial institutions."
The surprises don't stop there. CUs are also making loans in the last category many would expect: first mortgages.
"Credit unions have doubled our percent of the mortgage market over the past year," Becker related. "The CU Housing Roundtable had set a goal of going from 2% to 10% [of the mortgage market] in 10 years, and when we set that goal it was a big, hairy, audacious goal. Now it doesn't seem so big, hairy and audacious anymore."
Where there is some tightening on the real estate side, Becker suggested, is home equity loans, "especially if the credit union doesn't own the first mortgage because they can't see what's going on with the underlying loan."
The depreciation in many markets has also forced a reworking of approved lines.
Though some experts had previously suggested credit card loans would continue to see strong demand as consumers turn away from borrowing against the equity in their homes, actual volume on plastic cards has declined.
"Warren Buffet recently said that he has never seen in his lifetime where people just stopped shopping," Becker said. "People aren't just downgrading to cheaper alternatives, from the Gucci purse to the JCPenney purse, they just stopped shopping entirely."
But if consumers have stopped shopping, credit unions have not stopped lending, and will continue to lend despite the ongoing corporate crisis, Becker suggested. "The corporate (CU) issue could force a pull-back on lending, but the thing is, [the assessment and impairment costs are] not all coming out of lending," he shared. "Some credit unions are allowing their capital to erode. And, of course, share growth is up, which also erodes capital, so they're having to address that."
Though delinquencies, charge-offs and bankruptcies are trending up, Becker insisted the news is not all bad. "Credit unions are not totally isolated from what is going on in the market. So credit unions are being impacted, but they are doing much better than the banks."
