To grow more loans, credit unions might do well to emulate the spirit of Apple’s “Think Different” campaign. That’s especially true during today’s
slow economic recovery.
Credit unions that do step out of their lending comfort zones are seeing results. Many are nurturing incremental growth by taking on more risk and re-imagining traditional loan products.
“We’re in a much better place than in 2010 or 2011, but we’re still not in a place that feels normal,” says Mike Schenk, CUNA’s vice president of economics and statistics. “Labor markets haven’t completely recovered.” Roughly nine million jobs were lost in the recession, but the economy has only regained about four million to date.
Do prepurchase home buyer counseling and foreclosure mitigation counseling reduce mortgage delinquencies
and foreclosures? Several studies suggest they can, according to Beth Luke, partner relations specialist with GreenPath Debt Solutions, a CUNA Strategic Services alliance provider:
Businesses and consumers alike remain jittery about the potential fallout from failing European economies, including the potential impact on U.S. trade and investment banks. Businesses also are well aware the economy could be dragged down if the
federal government fails to avert the year-end “fiscal cliff” of mandatory spending cuts—required by the Budget Control Act of July 2011—along with tax increases.
Assuming the government avoids the fiscal cliff, CUNA projects loan growth of 4% in 2012 and 5% in 2013. Schenk notes those projections assume the housing market continues its gradual recovery, which took shape in 2012 through improvements in sales, construction activity, home prices, and builder confidence.
Credit unions interested in loan growth might be forced to re-examine their attitudes toward risk. Schenk says consumers are likely to hang on to 30-year fixed-rate mortgages made while interest rates remained low.
“When interest rates go up, the hits to net income will become obvious for many credit unions because funding costs will rise faster than asset yields,” Schenk says. “Because of this, many credit unions that are looking to boost bottom lines but are reluctant to take on more interest-rate risk are re-examining their appetite for credit risk and/or are looking to branch out into new types of lending programs—filling voids in their current menu of loan offerings.”
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