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Student loans are exception to declining delinquencies

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ATLANTA (8/27/12)--Credit unions will be happy to learn that delinquency rates in the nation's home and auto loans and credit cards saw double-digit declines from July 2011 to July 2012. But those who offer student loans should be alert to student loan delinquencies and write-offs, which  increased significantly, says a new report.

According to Equifax's monthly National Consumer Credit Trends Report for July:

  • Auto loan 60-day plus delinquency rates dropped 35%;
  • Consumer finance 60-day plus delinquency rates declined 23%;
  • Bank credit card 60-day plus delinquency rates decreased 21%;
  • First mortgage severe derogatory rates--those primarily loans transitioning to real estate owned (REO) status--declined 17%;
  • First mortgage 30-day plus delinquency rates fell 15%; and
  • Home equity revolving 30-day plus delinquency rates slipped 7%.
However, write-offs for student loans rose more than 29% from June to July and 60-day delinquency rates for these loans increased more than 14% from July 2011 to 2012. During that 12 months, student loan balances rose $58.5 billion.

The number of student loans has risen nearly 24%, to 116 million loans in July from 89 million loans in July 2011.

At $9.3 billion, student loan write-offs year-to-date through July are 10% higher than the $8.4 billion a year ago. These loans' severe derogatory balances--the major component of write-offs--year-to-date through July totaled $7.3 billion or 14% higher than the $6.3 billion for the period a year ago.

"Student loans is one area of lending not affected by tighter underwriting standards since the start of the recession," said Equifax Chief Economist Amy Crews Cutts. "The investment in higher education pays off over a person's lifetime, while the tuition cost has to be paid up-front, leading to big demand for student loans.

"Unfortunately, the current job market has not been kind to new graduates and their student loans start to come due once they graduate--if they don't have a job by the time the first installment is due, they can find themselves in quite a jam," Crews Cutts said.

Equifax also noted new credit increased 13% to $348 billion in May 2012 from $305 billion in May 2011.  Bank credit cards rose 21%--to $72.9 billion from $58.1 billion from May 2011.  Consumers continued to improve their credit management through making higher monthly payments on card accounts and refinancing mortgages at lower rates, said Equifax. Growth in total credit is consistent with the overall slow-but-steady improvement in the economy, said Crews Cutts.

Credit unions' 60-day plus delinquencies for all loans were 1.44% of total loans in March, the latest data available, according to the Credit Union National Association's Credit Union Profile  for First Quarter 2012. Net chargeoffs to average loans were 0.79%. Both figures are down from 2011, at 1.60% and 0.91%, respectively.

Canadas CUs ranked No. 1 in service for eighth year

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TORONTO (8/27/12)--Canadian credit unions again ranked No. 1 in overall customer service excellence among all the financial institutions in the country, according to the 2012 Ipsos Best Banking Awards.

Credit unions also took sole honors in two other categories: Branch Service Excellence and Values My Business (Canada NewsWire Aug. 23).

"For over a hundred years, Canadian credit unions have met the personal and business financial needs of their members by focusing on what they believe is most important--putting their members' needs first, and treating them as individuals," explained David Phillips, president/CEO, Credit Union Central of Canada.

"While innovative ideas, products and services are an integral component of our co-operative system, Canadian credit unions and caisses populaires [Quebec's credit unions] never lose sight of what is most important: our dedication to meeting the individual needs of our over five million members," Phillips added.

Survey results indicated that credit unions took sole honors in Branch Service Excellence for the eighth year in a row and Values My Business for the fifth year in a row. They also tied for first place among all financial institutions in two other categories: Financial Planning & Advice and Telephone Banking Excellence.

Tower FCU members save big with HARP

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LAUREL, Md. (8/27/12)--Tower FCU in Laurel, Md., is helping members who are in trouble with their mortgages to refinance their homes at today's historically low interest rates--saving them thousands of dollars--through the federal government's Home Affordable Refinance Program (HARP).

It's a strategy that's paying off--for the members and for Tower, said the $2.37 billion asset credit union. To date, Tower has amassed more than  $70 million in HARP applications, including those pending and ones that have closed. 

"The intention of HARP was to help people who are current on their mortgage payments, but do not qualify for a traditional refinance due to a significant loss in their home's value, or who have little or no equity, to refinance and take advantage of lower interest rates," said Barry Stricklin, Tower's vice president of real estate lending. Borrowers may be eligible for HARP if their loan was sold to Fannie Mae or Freddie Mac before June 1, 2009.

Prior to the rollout of the second phase of HARP in March, Tower reached out to its members. "We wanted to take a proactive approach," said Martin Breland, Tower president/CEO. "We assumed many of our members were not aware of the new program and didn't know that they may qualify for a refinance even though their homes had lost value."

The results have been dramatic, Breland said. Since March, more than a quarter of Tower's mortgage refinance applications have been HARP loans.

Stricklin said the average monthly savings for those who refinanced through HARP is $425, or more than $5,000 annually. Some are homeowners on a fixed income. "Several members are saving over $700 per month, with one saving $979 a month--almost $12,000 per year. That's obviously life changing," he said.

While other lenders offer refinancing through HARP, Tower's program is different, Strickland noted. For instance, some lenders have self-imposed caps on loan-to-value and debt-to-income ratios, and others charge higher fees for HARP refinances than for conventional ones. Tower does neither. Many offer HARP only to people who already have a mortgage with them. Tower does not require that. The credit union also allows members with a home equity line of credit or home equity loan to refinance through HARP, if eligible. 

To get the word out to members about HARP, Tower sent a series of mailings to those identified as good candidates for the program, based on when they closed their loan and house values in the areas where they live. The mailings included members who had mortgages with Tower and those with mortgages from other lenders.

Stricklin said he immediately knew they had struck a chord with members. "When the first mailing hit, our real estate lending department was inundated with calls," he said. "Some members who called didn't qualify for HARP, but were still able to refinance their homes with Tower at a lower rate using conventional programs.

"The major part of the current HARP is that there is no maximum cap on the loan-to-value requirement for refinancing, as was the case with the previous version," Stricklin added. "So even if a home has lost significant value due to the decline in the housing market, homeowners may still be able to refinance at a lower rate."

In many cases an appraisal is not required, Stricklin said.

CUANY taps Sievewright for economic forum

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ALBANY, N.Y. (8/27/12)--The Credit Union Association of New York has tapped Mark Sievewright as keynoter for its first Economic Forum, to be held Nov. 1-2 in Albany, N.Y.

The event, which is open to attendees from multiple states, aims to provide credit union leaders with information on business strategy, economics, investing and more, the association said. 

Sievewright, who is president of Credit Union Solutions at Fiserv, will speak on "Credit Unions--Staying Relevant, Becoming Prevalent: A Futuristic View of the Credit Union Industry and its Potential," said the association.

A transformation is underway in the U.S. financial services industry that will have a dramatic effect on how credit unions do business, how they strategize about their futures and how they collaborate around products, service and information, Sievewright says. During his presentation, he will highlight industry changes, their implications for credit union leaders and the strategies it will take to remain relevant and become prevalent.

Sievewright has 30 years of financial services industry experience. He has held senior leadership roles at HSBC in London and MasterCard International in Brussels, and served as president/CEO of Payment Systems Inc. and of the TowerGroup, a technology research and advisory firm for the financial services industry.

Deadline for registrations is Oct. 18, with early bird registration due Sept. 20.

Nebraska members save 1.1M in Save to Win

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OMAHA, Neb. (8/27/12)--Nebraska credit union members have saved more than $1 million dollars since state credit unions initiated the Save-to-Win program seven months ago.

The Save-to-Win program was launched in January to encourage financial fitness and savings habits by rewarding members for savings. Members have saved about $1,123,880--or $857.27 per account--with more than 121,000 eligible Nebraska credit union members participating. 

The Save-to-Win accounts are 12-month savings certificate accounts that allow for additional deposits. Prizes, a competitive interest rate and small deposit requirements are incentives for the program. With every $25 deposited, members qualify for a chance to win a grand prize of $25,000. Monthly cash prizes are also awarded.

Half of Nebraskans have little to no savings, with 32% considering themselves "asset poor," said the Nebraska Credit Union League.

"The number of Nebraskans who are financially unfit, who are living paycheck to paycheck is quite alarming," said Scott Sullivan, league president/CEO. "We designed the Save-to-Win program to give credit union members an opportunity to improve their financial situations with a fun and easy savings program."

Nebraska is one of five states approved to coordinate the Save-to-Win Program and one of two states offering it to members. Michigan was the first to initiate the program in 2009 with eight participating credit unions. The first year, members saved an average of $734 per account. In 2010, 36 credit unions participated, including seven of the original eight. The program continues to thrive with more than 16,400 members at 43 credits unions participating in Michigan, said the league.

Eighteen new innovators join Filenes i3

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MADISON, Wis. (8/27/12)--The Filene Research Institute has selected 18 credit union executives to join the institute's i3 (Ideas, Innovation, Implementation) program, which fosters the development of new ideas and innovations for credit unions.

Each member will serve a two-year term, participate in semi-annual meetings arranged by Filene, and be responsible for piloting new ideas at their credit unions. Filene received more than 70 applications from credit union executives.

"While the struggles of consumers and financial institutions are all too real, this environment is perfect for innovation," said George Hofheimer, Filene's chief research and innovation officer. "We're confident that this new group of i3ers has the skills, passion, and grit to transform the lives of consumers through credit unions."

i3 has helped launch programs such as Save to Win (prize-based savings accounts), nationwide Savings Challenges (reality TV meets wallet improvement), and Debt in Focus (an anonymous, online financial assessment tool), which have improved the way credit unions provide financial guidance to their membership. Credit unions can learn more about all these ideas by e-mailing innovation@filene.org.

The newest i³ members are:

  • Megan Armstrong, manager, member services, Saratoga's Community FCU, Saratoga Springs, N.Y.;
  • William Azaroff, director, business and community development, Vancity, Vancouver, B.C., Canada ;
  • Brad Barnes, vice president and chief financial officer, Air Academy FCU, Colorado Springs, Colo.;
  • Kayce Bel, chief operating officer, Alabama CU, Tuscaloosa, Ala.;
  • Marquis Boochee, vice president, eStrategy and innovation, Xceed Financial FCU, El Segundo, Calif.;
  • Danielle Brehmer, vice president, marketing, Lake Trust CU, Lansing, Mich.;
  • Cindy Brucato, assistant vice president, application development, GTE Financial, Tampa, Fla.;
  • Taylor Carstens, vice president of sales and lending, People's Trust FCU, Houston;
  • Robert Christiansen, district manager, Servus CU, Edmonton, Alberta, Canada;
  • Andrew Downin, manager of product development, Schools First FCU, Santa Ana, Calif.;
  • Damian Jakubczyk, vice president of information technology, Elevations CU, Boulder, Colo.;
  • David Klavitter, senior vice president, marketing and public relations, Dupaco Community CU, Dubuque, Iowa;
  • Matt Monge, chief culture officer, Mazuma CU, Kansas City, Mo.;
  • Andea Mosher, vice president of lending, University of Michigan CU, Ann Arbor, Mich.;
  • Michael Salerno, e-services manager, America First FCU, Riverdale, Utah;
  • Andrew Spirrison, assistant vice president, retail delivery, FORUM CU, Indianapolis;
  • Mary Beth Spuck, vice president of organizational development, TwinStar CU, Lacey, Wash.; and
  • Denise Wymore, vice president, member loyalty, Del Norte CU, Los Alamos, N.M.

Kentucky league announces state awards winners

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LOUISVILLE, Ky. (8/27/12)--The Kentucky Credit Union League recognized state winners for work in social responsibility, philosophy, and financial education.

Honorees will compete with other credit unions for national-level awards presented by the Credit Union National Assocation (By the Way Aug 24).

The Dora Maxwell Social Responsibility Recognition Award Program honors credit unions for their involvement in community projects and activities.

The Louise Herring Philosophy-in-Action Member Service Award honors credit unions for their practical application of the people-helping-people philosophy.

The Desjardins Youth/Adult Financial Education Award recognizes leadership within the credit union movement on behalf of youth/adult financial literacy.

Dora Maxwell Award winners include:

  • Lake Chem Community FCU, Benton, $20 million to $50 million in assets;
  • Autotruck Financial FCU, Louisville, $50 million to $100 million;
  • Service One CU, Bowling Green, $100 million to $200 million;
  • Park Community FCU, Louisville, $200 million to $500 million;
  • L&N FCU, Louisville, $500 million to $1 billion; and
  • Fort Knox FCU, Radcliff, $1 billion plus.
Louise Herring Award winners are:

  • Service One CU, $50 million to $250 million in assets;
  • Commonwealth CU, Frankfort, $250 million to $1 billion; and
  • Fort Knox FCU, $1 billion plus.
Desjardins Youth/Adult Financial Education Award winners are:

  • Service One CU, $50 million to $250 million in assets; and
  • Commonwealth CU, $250 million to $1 billion.

CU System briefs (08/24/2012)

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  • DUBLIN, Ohio(8/27/12)--U.S. Rep. Chabot (R-Ohio) (fifth from left) visited Sharefax CU's Mason, Ohio, office, which is located in the newly drawn 1st Congressional District, according to the Ohio Credit Union League (eLumination Newsletter (Aug. 22). CEO Art Kremer and 15 credit union leaders last week discussed regulatory burden, small businesses, the federal budget, the upcoming elections, gridlock in Congress, and the potential for moving much-needed credit union legislation before the end of the year. Chabot noted that any legislation would likely be taken up in a lame duck session after the election. Chabot is a sponsor of bills to lift credit unions' member business lending cap and to provide examination fairness, and has provided written support of credit unions' tax exempt status. League General Counsel John Kozlowski attended the meeting. The Credit Union National Association says that lifting the MBL cap to 27.5% of assets from its current 12.25% would help provide $13 billion in new small business loans and help create 140,000 new jobs at no cost to taxpayers.(Photo provided by the Ohio Credit Union League) …
  • DUBLIN, Ohio (8/27/12)--Homeland CU in Chillicothe, Ohio, hosted U.S. Rep. Steve Stivers (R-Ohio) earlier this month. During the meeting Stivers talked about his support for credit unions' member business lending (MBL) legislation and expressed appreciation for what credit unions do for their members, said the Ohio Credit Union League. Stivers said he has received pushback from credit union opponents over MBL legislation, but added his support is about doing the right thing for businesses. The Credit Union National Association has estimated that raising the MBL cap to 27.5% of assets from its current 12.25% would make available $13 billion more to small businesses and help create 140,000 jobs the first year, without affecting taxpayers. A dozen credit union staff and board members attended (eLumination Newsletter Aug. 22) …
  • ST. PAUL, Minn. (8/27/12)--
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    St. Paul (Minn.) FCU is kicking off the school year with its first student-run branch office at Como Park High School in St. Paul. The credit union has worked with the school for years helping teach students about financial literacy and offer additional business training. The in-school credit union is an extension of the school's business education program and the St. Paul FCU's work with business teachers and administrators. Staffing the branch will be, from left, St. Paul FCU School & Branch Education Coordinator Trevor Malone, and high school interns Tim Smith, a junior, and seniors Kyle Kottke and Dylan Schmidt. The branch will offer a full range of services, including check cashing, deposits, loan applications and financial assistance, and is open 10 a.m. to 1 p.m. on weekdays to serve students and faculty. Malone will oversee the student employees. (Photo provided by the Minnesota Credit Union Network) …