credit unions

Credit unions weather tough market

"For the first three months of 2008, loan originations by credit unions went up dramatically vis a vis where they were historically," says Walter O'Haire, senior analyst in the banking group at financial consulting firm Celent. "The large lenders still dominate, but credit unions went from having less than 2 percent of the first-mortgage  market share to over 3 percent versus the first quarter of 2007.

"What we're seeing on a local basis is credit unions stepping into the breach and saying, 'We're willing to sit down with you.' It's the old-fashioned model -- knowing the area where your customer lives, getting to know your customer, and being able to go through it with them."

Although membership growth has remained fairly steady for the past couple years, some credit unions are seeing an increase in applications, says Ray Springsteen, senior vice president for business development at Callahan & Associates in Washington, D.C.

"We've seen credit unions get more publicity recently. I spoke with a Seattle credit union yesterday that says its membership growth is up 7 percent year-to-date. Most credit unions are focused on providing value to their members and not going out looking for the quick money." (Watch video on joining a credit union)

Are deposits insured?

The National Credit Union Association (NCUA) wears two hats. It is the federal agency that charters and supervises federal credit unions and it operates the National Credit Union Share Insurance Fund, which insures deposits in all federal credit unions and many of the state-chartered institutions. Just as with banks, credit union deposits are insured up to $100,000 in regular share accounts, and up to $250,000 in certain retirement accounts.

The regulatory agency says there have been nine credit union liquidations so far this year; no more than normal -- and that not all are attributable to the mortgage crisis. Problems have been isolated, not systemic, and they hope to keep it that way.

"We have seen an increase in the level of delinquency and charge-offs, but they're still considerably lower than industry averages," says NCUA spokesman John McKechnie.

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It may have something to do with the fact that we've been issuing guidance to credit unions since 2004, before the housing downturn developed, where we tried to make sure credit unions stayed on the right side of the road when it came to mortgage lending."

A recent Wall Street Journal article, "Mortgage-Market Trouble Reaches Big Credit Unions," noted that "five of the nation's largest credit unions are reporting big paper losses on mortgage-related securities."

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