LAKE MARY, Fla.-The pace of regulatory change is likely to pinch lending at CUs that are not as prepared as they should be in 2010.
Mitch Lucas, director of Compliance Solutions at Harland Financial Solutions, called the speed at which financial regulations are changing "monumental," adding the market hasn't not seen wholesale reforms like those being seen now since enactment of the Truth in Lending Act 40 years ago.
Changes to open-ended lending rules and RESPA regulatory reform and more "will cause some operational challenges for credit unions," Lucas said. "I think the opportunity there is to consider other solutions other than a multi-featured open-ended lending plan."
Lucas noted that CUs would have to be as efficient as possible, especially if the economy recovers in earnest and lending demand increases. And while the size of the lending pie may be shrinking overall, the CU share is definitely increasing-driving up demand at cooperatives. "We're hearing through our credit union clients that the sheer loan growth in the last 12-18 months has been a challenge for them," said Lucas. "There is tremendous growth in mortgage lending and member business lending."
Member business lending provides a "huge opportunity" for credit unions as the broader market is worth $3.55-trillion. With the mortgage backed securities marketplace still not functioning properly, the big banks are targeting other investments, especially government-related investments, and that gives CUs the chance to step into the gap with mid-tier and smaller businesses that need credit. Potential changes to the MBL cap this year could make this market even more attractive and accessible.
