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CU reacts to GMs return to car leasing

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NEW YORK (8/3/09)--General Motors (GM) could begin leasing vehicles again this month, according to The Wall Street Journal (July 31). About 3% of credit unions offer auto leasing. These credit unions have about 8.3% of credit union members, according to the Credit Union National Association’s Credit Union Service Profile for December 2008. Lake Michigan CU, Grand Rapids, Mich., did not react strongly to news about GM possibly leasing again. The credit union ended its leasing program last year when GMAC, Ford and other auto giants pulled out of the leasing market, Scott Wiggins, vice president of lending, told News Now. Even if GMAC starts leasing again, the credit union doesn’t anticipate offering auto leases. It’s likely that auto giants like GMAC will have to increase their lease payments and lower residuals to make it work, Wiggins said. Leasing was attractive to members who were interested in owning a certain car for a few years. In the past, leasing payments had cost some members less than auto loan payments. But the gap in savings will likely shrink, so members may reconsider the benefits of leasing a car. “If they can buy a new car for $360 a month in loan payments, rather than lease a car for $340-$345 a month, they may opt to buy and build equity,” Wiggins said. When Lake Michigan CU stopped its leasing program, it did not receive any calls from members asking them to reinstate the program. “Members were unfazed,” Wiggins said. Normally, members had sought leases through dealerships, and came to the credit union if they couldn’t get leases through dealers.

U.S. Central posts 537M net OTTI losses

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LENEXA, Kan. (8/3/09)--U.S. Central FCU Friday posted $537 million net Other-Than-Temporary-Impairment (OTTI) losses for the second quarter of the year. U.S. Central said that $38 million of the loss is applied to retained earnings and that action reduces net earnings to zero. The remaining $499 million OTTI loss is applied to membership capital share balances. Combined with membership capital share depletions resulting from first quarter of 2009 OTTI charges, that represents a cumulative 63.3% depletion of membership capital shares. At U.S. Central, two of the three available sources of capital--retained earnings and paid-in-capital--have been reduced to zero. U.S. Central also has a $1 billion capital note issued under the NCUA's Corporate Credit Union Capital Stabilization Plan. Excluding OTTI charges of $537.0 million, U.S. Central recorded net gains on financial instruments of $3.8 million in the second quarter of 2009, compared with losses of $4.3 million for the same period in 2008. Fee income totaled $5.3 million for that period, which was nearly the same as a year earlier. Among expenditure savings, U.S. Central reported that operating expenses were $12.4 million, a 21.4%, or $3.4 million, reduction compared to the same period in 2008. Expenses for salaries and benefits decreased from $7.4 million to $5.9 million, primarily as a result of staff reductions and the elimination of incentive compensation, the corporate credit union said in its report. U.S. Central also noted it placed restrictions on marketing, public relations, travel and incidental spending, which resulted in nearly $1.2 million of expense reductions. Not surprising, U.S. Central identified the primary risk currently facing its investment portfolio as credit risk--the risk that assets owned by the corporate, including investment securities, loans and short-term investments, may not pay all principal and interest according to their contractual terms due to the current economic downturn. Use the resource link below to access the full report.

CUcorp RV finance company enter marketing agreement

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LIVONIA, Mich. (8/3/09)--The Michigan Credit Union League's wholly owned subsidiary, CUcorp, has entered into a marketing agreement with recreational vehicle (RV) finance company Thor CC Inc. (TCC) to promote consumer RV loans to credit unions across the country. A University of Michigan researcher predicts that the number of RV-owning households will increase by next year because strapped consumers are turning to RVs for closer-to-home vacations. Thor CC is the captive finance company for Thor Industries Inc., the world's largest manufacturer of RVs with names such as Airstream, Breckenridge, CrossRoads, Damon Motor Coach, Dutchmen, Four Winds, Keystone and Komfort. Thor Industries maintains the largest market share for towable units. Through its 1,300 RV dealers nationwide, TCC originates secured RV loans and sells those loans to financial institutions. David Adams, CEO of CUcorp and the league, said the partnership broadens the complement of CUcorp's lending products provided to credit unions. "High-quality RV loans can help credit unions diversity their portfolio in a safe and profitable manner," he said, adding it also "provides an additional avenue to attain new members." Traditionally RV loans have outperformed mortgage and home equity portfolios, said cuCorp and Thor. For more information, contact Lisa Robinson, CUcorp vice president for marketing and sales at 800-262-6285, ext. 539 or at lisa.robinson@cucorp.com.

Lawyers sue company chaired by CU Mortgage CEO

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NEW YORK (8/3/09)--At least four law firms have withdrawn or are seeking to withdraw from a case that involves a financially troubled company formerly chaired by a man convicted of defrauding credit unions, Fannie Mae and others when he headed up the now-bankrupt U.S Mortgage Corp. and CU Mortgage. The defendant company is Dallas-based Home Solutions of America Inc., which specializes in restoring homes after disasters. Its former chairman, Michael McGrath, pleaded guilty June 11 to defrauding 19 credit unions, Fannie Mae and others of $139.6 million related to the bankruptcies of the mortgage companies. He will be sentenced on Oct. 1 (News NowJune 16). According to a July 21 summary judgment in the New York Supreme Court, Justice Emily Goodman awarded New York law firm Morgan, Lewis & Bockius $2.4 million, plus interest, for legal fees owed the firm by Home Solutions of America Inc., from 12 legal situations in 2007. The New York Supreme Court is a trial-level, lower court. The court acting as the highest court in the state is the New York Court of Appeals. Also, on July 23, Justice Goodman granted another law firm--New Jersey-based Riker, Danzig, Scherer, Hyland & Perretti LLP-- its motion to withdraw as attorney of record for Home Solutions because Home Solutions owed the firm $60,000 for work from November 2008 to April 2009. The firm had defended Home Solutions in the lawsuit filed by Morgan, Lewis & Bockius (New York Law Journal July 29). The other firms trying to withdraw are from Texas--Fulbright & Jaworski and Hallett & Perrin, said the journal. In January 2008, Home Solutions of America was delisted from the Nasdaq Stock Exchange after missing deadlines for filing quarterly reports. It had financial and legal difficulties for most of 2008 and has been selling or closing all its divisions except those in New Orleans, it said in a filing with the Securities and Exchange Commission. McGrath had offered Morgan Lewis $1 million to settle accounts but the law firm said it was owed $2.5 million. Riker Danzig had required McGrath to sign a personal guaranty for payment of fees and costs, but McGrath resigned as chairman of Home Solutions and federal prosecutors froze his assets.

Budget impasse prompts changes to Better Choice

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HARRISBURG, Pa. (8/3/09)--Pennsylvania’s budget impasse has prompted the Pennsylvania Credit Union Association (PCUA) and the state treasurer to make temporary changes to the Credit Union Better Choice program to help state employees facing payless paydays. PCUA President/CEO Jim McCormack and Pennsylvania State Treasurer Rob McCord issued a letter to 82 credit unions participating in the program. The letter asks credit unions to allow state employees to apply for a separate Better Choice loan up to a maximum of $500 on each regular payday during the impasse (Life is a Highway July 31). Credit unions also are asked to forgo the deposit of an additional amount equal to 10% of the loan to an account in the employee’s name when making second Better Choice loans, and waiving the regular application fees for second and subsequent Better Choice loans to state employees. To qualify for the Better Choice loan, the state employee must be eligible for credit union membership and have an account. Borrowers are required to repay their 90-day loans in full before being eligible to take out subsequent loans.

Phil Gramm Marci Rossell added to Economic Forum lineup

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DALLAS (8/3/09)--Marci Rossell, former economist at the Dallas Federal Reserve and former chief economist at CNBC, and Phil Gramm, former U.S. senator from Texas, have been added to the speaker lineup at Southwest Corporate’s 32nd annual Economic Form. The forum is scheduled for Oct. 27 and 28 in Dallas. Online registration for the event is now open. The forum aims to provide credit union leaders with information on how to plan for 2010 and beyond. This year’s theme is “Navigating the New Normal.” Rossell and Gramm will join:
* Gigi Hyland, National Credit Union Administration board member; * Martin Feldstein, national economist who serves on President Barack Obama’s economic recovery advisory board; * Bill Hampel, Credit Union National Association chief economist; * William Ford, former president of the Federal Reserve Bank of Atlanta and former chief economist for the American Bankers Association; and * Charles Idol, Southwest Corporate consultant and credit union industry economist.