NEW YORK -
While they noted small credit unions aren't able to take on the level of risk many larger lenders have, many CU officials say they would also like to be in a position to help people facing foreclosure. Credit union representatives used words such as "might," "not sure," "hopefully," "fear," and "optimistically" trying to describe a situation that is still rapidly developing, and often deteriorating, by the day.
National Federation of Community Development Credit Unions Executive Director Clifford Rosenthal said that the impact on smaller CUs shouldn't be directly felt, but also warned that a high number of foreclosures in cities such as Detroit, Atlanta and Indianapolis could delay or roll back otherwise improving local economies.
"People have been predicting the explosion of this for years," Rosenthal said. "There is no doubt there is the potential to destabilize communities. It astounds me; why couldn't people see this? I just don't get it."
Rosenthal said he thinks it's a bit early to make solid predictions, but when it comes time to look back, it might turn out best for credit unions "slow and steady" approach to mortgage lending. "Those who had a much more measured approach might win out," he said. "I'm not sure anyone knows where this will end." At Bethex CU in the Bronx, CEO Joy Cousminer said she's seen the effect of subprime mortgages with members of her credit union, which is one reason the credit union ceased writing them earlier this year. Cousminer said new board members came aboard and quickly sounded the alarm about a possible rush on foreclosures.
"They injected fear. It might turn out to be good," Cousminer said. The decision has also turned out to be good in another way, with some credit unions reporting a spike in interest from members who've never asked about mortgages or home buying. Cousminer noted that her area of the Bronx in New York City doesn't have many homeowners at all.
"We've got a lot of people asking about home buying education classes. Housing is in the air, so maybe it's a positive thing," Cousminer said.
Similarly, in Rochester, N.Y., the $7-million Genesee Co-Op FCU is also finding increased interest in borrowing for a new house. CEO Melissa Marquez also said she has yet to see any foreclosures among her membership.
"We've had a huge spike in mortgage applications. It's just been amazing," Marquez said. "It's so much in the media. Of course, we want them to come to us first."
Genesee has already begun referring members with questions to the Empire Justice Center for legal advice on foreclosures plus counseling offered by the city, county and local United Way. As far as feeling the indirect effects of the mortgage slowdown, $12.4-million Bethex serves the "poorest of the poor" and Cousminer said it's difficult to determine just yet if her credit card portfolio is being affected by a cash crunch, as her 7,000 members aren't "such great payers" in the first place.
The tightened credit standards by many lenders has created an opportunity for credit unions, as many would-be borrowers are being shut out of the process. Bob Dorsa, president of the American Credit Union Mortgage Association (ACUMA) in Las Vegas, for example, sees a prime opportunity for credit unions to fulfill their traditional mission to help "good people that have a problem."
"We still contend this is an opportunity to rescue those people who have problems," Dorsa said. Dorsa said credit unions will have to make the effort with marketing and outreach to locate any member in trouble with his or her mortgage, especially when that mortgage was likely obtained from another lender. Dorsa added while the credit union community has largely limited its exposure to bad mortgage loans, that needs to change in order to help those most in need. In short, he said, it's going to require taking on more risk.
"Every month since '75, credit unions have charged off auto loans. For 30 years, no one had a problem," he said.
Genessee Co-op's Marquez echoed Dorsa's concern that credit unions might be missing an opportunity right before their eyes. "What those people need is exactly what credit unions should be offering," Marquez said.
