With its mortgage business booming, the Community Schools Credit Union in Rochester Hills, Mich., wants to offer home loans to even more customers by doing something no chartered credit union in the state has ever done: become a thrift.
That is no easy feat. The law governing credit unions in Michigan - which charters 300 of them - does not address this type of conversion. Moreover, state thrift law says that most financial institutions wishing to become chartered thrifts must get approval from two-thirds of all stockholders or members - not just this proportion of those voting on a conversion.
The Michigan League of Community Banks wants to change that. The organization says a proposal that it has submitted to Rep. Alan Sanborn, the Republican chairman of the Michigan House banking committee, would let state credit unions become mutual thrifts with a simple majority of members participating in the election to convert.
"We're a pro-choice group," said Robert Howell, president of the community bank group. "We think financial institutions, regardless of what charter they now have, should be able to select the best charter to serve their market and customers."
The proposal, which Rep. Sanborn has said he would soon introduce in committee, would become part of a bill that seeks to streamline thrift regulation and lengthen the time between examinations to 18 months, from 12.
Except for the credit union provision, the bill for the most part would mirror a measure the state enacted for banks in January, which is why Mr. Howell said he expects little controversy.
Even the Michigan Credit Union League said it does not plan to fight the legislation.
Lori Bahnmueller, a spokeswoman for the credit union group, said it only plans to lobby for disclosure provisions to ensure that credit unions pondering conversions inform their members how making the switch would affect them.
"It's not a minor event to go from being a state-chartered credit union to a savings bank," Ms. Bahnmueller said. "We want to make sure members are fully aware of what it would mean."
Assuming the proposal becomes law, the $35 million-asset Community Schools Credit Union could be the first beneficiary. Without knowing of the thrift group's legislative plan, the credit union in December applied to the Michigan Financial Institutions Bureau to convert its charter even though credit union law does not spell out whether it can.
The 12,500-member credit union, which serves employees and families affiliated with the Rochester Hills school system, said becoming a thrift would let it improve its focus on residential loans.
Demand for the credit union's home-loan products has skyrocketed since it introduced them five years ago, said Brian Ashley, president and chief executive officer. Residential real estate loans account for more than 50% of its portfolio.
Mr. Ashley credited that growth to a strong housing market. He said a charter conversion would let the credit union do even more mortgage and home-equity business.
"We're looking for the best way to run our business," he said. "To make a positive impact on the community and make sure we're viable in the future, we believe that we need to open our doors to more people."
