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LENDING CONTINUES DECLINE, ACCORDING TO CUNA STATS

MADISON, Wis.-Lending at credit unions declined again in January by 0.7%, falling for the fourth straight month, as consumers continue efforts to shed debt, according to CUNA.

Lending declined across the board in January, with every category showing a drop-off: adjustable rate mortgages, fixed-rate mortgages, new and used auto, credit card, home equity and unsecured personal loans, according to CUNA. The slow start to the new year follows a decline in lending of 1.4% for 2010, the worst loan performance in three decades, according to CUNA.

Mike Schenk, senior economist for CUNA, said credit unions can expect sluggish loan demand for the coming months as consumers continue to deleverage from historic debt loads. The household debt ratio is down from historic highs of around 1.25% of household income in 2008 to around 1.10%, but still have more to go before consumers are comfortable, he maintains.

The low demand will be even more pronounced during the next few months, which are typically a slow time for CU lending, said Schenk. "People still have a lot of debt and are still worried about the debt they have, and they are continuing to pay it down," he said.

But he said he expects lending to pick up in the second quarter and the CUNA economics staff is predicting loan growth of as much as 4% for the year.

The same trend has hit banks even more, said Schenk, noting the combination of household deleveraging and efforts to trim bad-performing loan portfolios among banks.

Savings also declined, a troubling dual hit to credit unions, with share balances falling by 0.2% in January. Savings grew by 4.49% for 2010, less than half the 10.33% growth in 2009 and the lowest since 2006.

 

GOP TRIES TO REPEAL HAMP, OTHER FORECLOSURE PROGRAMS

WASHINGTON-The Republican leadership of the House Financial Services Committee plans to introduce four bills that would terminate the Obama administration's mortgage foreclosure programs they labeled "failed" and "ineffective."

The bills to be voted on by the Republican-controlled committee next week would eliminate the Neighborhood Stabilization Program, the FHA Refinance Program, the Emergency Homeowner Relief Fund, and the Home Affordable Modification Program, known as HAMP, which has provided grants to dozens of CUs to intervene in foreclosures.

"In an era of record-breaking deficits, it's time to pull the plug on these programs that are actually doing more harm than good for struggling homeowners," said Rep. Spencer Bachus of Alabama, the new chairman of financial services. "These programs may have been well-intentioned but they're not working and, in reality, are making things worse."

According to the Republican leadership on the committee the HAMP was supposed to help 4 million homeowners, but only 521,630 loans have been permanently modified under the program, and the re-default rate is high. The government has spent about $840 million on HAMP, the leadership said.

Chances of the programs being eliminated with these bills are slim because they would still have to be approved by the Democratically controlled Senate, which is not likely to agree.

 

NCUA SUED OVER CONSERVATOR LOAN DEAL GONE AWRY

MIAMI-Power Financial CU filed suit against NCUA in federal court after NCUA cancelled the sale of more than $15 million of mortgages from troubled Keys FCU to the suburban Miami credit union.

Power Financial said its July 2010 deal with NCUA was critical because the borrowers were within its field of membership, a difficult condition to meet for credit unions buying whole loans. Under terms of the deal, approved by the Florida Office of Financial Regulation, the borrowers were set to become members of Power Financial, which has been trying to expand into the Florida Keys, a group of islands 160 miles south of Miami.

"It is extremely difficult for Power Financial to purchase replacement Mortgage Loans due to the fact that its ability to purchase the Mortgage Loans is limited by state regulation to specific preapproved geographic areas where persons may become members of Power Financial," the $475-million CU said in its suit. The deal was terminated in August after NCUA, which is running Keys, told Power Financial the sale was no longer in the best interest of Keys.

Power Financial said it sent several letters to Keys demanding the Key West credit union abide by the agreement but has not received a response. NCUA has been trying to resolve Keys FCU since it took the one-time $210-million CU under conservatorship in September 2009. One deal to acquire the CU by Dade County FCU fell through.

 

FOURTH QUARTER BRINGS MORE RED INK FOR FREDDIE MAC

WASHINGTON-Secondary mortgage market giant Freddie Mac reported another $1.7-billion loss for the fourth quarter of 2010, creating a $19.8-billion loss for the year.

The report, which comes with a request for another $500 million in government assistance, comes as Congress is opening its inquiry on the future of Freddie and its secondary market sister Fannie Mae.

The government rescued Freddie and Fannie in September 2008 to cover their losses on soured mortgage loans at a cost of $259 billion.

Fannie Mae and Freddie Mac own or guarantee about half of all mortgages in the U.S., or nearly 31 million home loans worth more than $5 trillion.

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