PHILADEPHIA -
"The variable line of credit product is forecast to be slow through 2007," observed Lisa Albany, chief lending officer with Trumark Credit Union. "We are promoting fixed-rate home equity loans through mass media and pre-approval efforts with a limited degree of success."
In addition, Albany said her credit union is pushing other products, including indirect auto loans, correspondent mortgage lending and small business loans, to help make up for the softer real estate market.
In San Diego, Jeannette Kelbaugh, manager of consumer lending for San Diego Metropolitan Credit Union, said interest in HELOCs may slow based on the market. If so, she continued, SDMCU will respond by changing its focus to other types of loans or repackaging existing products to meet market demands. "Auto loans may not be the only product to target, but we may design a marketing strategy."
Asked if she anticipates problems in the San Diego market due to the much-publicized problems in sub-prime lending, including a possible collapse of home values that leads to a recession, Kelbaugh pointed to the proliferation of option payment loans. She said the "teaser rates" for those loans are expiring and some homeowners are finding themselves facing financial hardship.
"Since we didn't participate in sub-prime lending, we aren't foreseeing any problems with foreclosures on our books. However, we are concerned about the members who are desperate to refinance because their home values have reduced, causing them to be at a negative loan-to-value ratio. We may not be able to help them."
At Philadelphia FCU, Donna Angeloni, manager of lending, agreed. "I think we are all concerned," despite the fact her credit union does not do much sub-prime lending. "As long as delinquencies stay where they are, we should be all right. We have seen a number of members coming in to use a home equity to refinance a first mortgage. Some of them probably are ARM products getting ready to reset."
In Florida, Vicki Lovett, VP-loan operations for Suncoast Schools FCU said Suncoast has avoided trouble by not developing any sub-prime loan products. Like the other lending experts we spoke with, she is concerned with the number of consumers who have interest-only or payment-option first mortgages at other financial institutions.
"Those payments are resetting now and are having a negative impact," she declared. "That is a product we never embraced. We do look closely at the payment schedules of first mortgages elsewhere when we are making equity loans. We want to make sure we are granting new loans in a knowledgeable environment."
