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CUs get advice from federation on mortgage loans
NEW YORK (8/22/11)--While the economic downturn continues to challenge financial institutions nationwide, Louisiana credit unions should be prepared to take advantage of the current opportunities to expand their mortgage lending portfolios, particularly among low- and moderate-income populations, said a representative of the National Federation of Community Development Credit Unions.
Community Development Credit Union CEOs pose with Anne Cochran, CEO of the Louisiana Credit Union League, and Terri J. Fowlkes director of community development investments for the National Federation of Community Development Credit Unions at the Louisiana Credit Union League’s recent Annual Meeting and Convention, Aug. 3-6 in New Orleans. Pictured, from left, are: Helen Godfrey-Smith, CEO, Shreveport (La.) FCU; Cochran; Bill Bynum, CEO, Hope FCU, Jackson, Miss.; Mignhon Tourné, CEO, ASI FCU, Harahan; and Fowkles. (Photo provided by the National Federation of Community Development Credit Unions)
Credit unions also should consider obtaining secondary capital and nonmember deposits to satisfy the regulatory demands of a growing balance sheet and a potential increase in membership, said Terri J. Fowlkes, director of community development investments at the federation. She made the comments at the Louisiana Credit Union League's recent Annual Meeting and Convention, held Aug. 3-6 in New Orleans. “With interest rates holding steady at rock-bottom levels, credit unions need to diversify their portfolios by continuing to make mortgages and increase their operating income,” Fowlkes said. “Responsible loans made to qualified members provide credit unions with a much better yield than they’ll get from most other investment vehicles, and help members build wealth through home ownership.” Fowlkes acknowledged the difficulty many credit unions have in making loans where no secondary markets exist, particularly for non-traditional loans such as Individual Tax Payer Identification Number loans, manufactured housing loans. and co-op loans. Through its CDCU Mortgage Center LLC, the federation purchases conforming and non-conforming affordable mortgage loans from member CDCUs. The CDCUs may maintain the servicing relationship on the loan, but the federation purchases that asset and provides the credit unions with capital to make more loans. Since 2005, the federation has purchased about $10 million in loans from CDCUs nationwide, and looks to expand its portfolio by several million dollars this year. The program is for credit unions that want to expand their lending activities and may not have enough capital to do so. “We conduct a rigorous due diligence on all the loans we purchase,” Fowlkes explained. “We have been growing our portfolio very slowly to ensure we buy performing assets from CDCUs. Given the economic distress across Louisiana, the federation and the Louisiana league are exploring ways to increase credit union mortgage lending--through the CDCU Mortgage Center Secondary Market and by providing financial resources in the form of deposits and secondary capital to Louisiana's low-income designated credit unions. The product was created in the late 1980s, and the federation was invested in dozens of credit unions nationwide for over 20 years. “Secondary capital is vital for CDCUs serving low-income communities, because it allows a credit union to grow without diluting its net worth,” she said. It allows credit unions to take calculated risk to help members, without incurring problems with regulators. Only low-income designated credit unions can accept secondary capital, according to National Credit Union Administration regulations, and only member CDCUs are eligible for secondary capital loans from the federation. A reception hosted by the federation was open to all conference attendees, and was sponsored by two member CDCUs, Shreveport (La.) FCU and ASI FCU, Harahan.
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