A soft landing for lending?
Lenders flex their creative muscles in the face of economic uncertainty.
Following a wildly successful 2022, with loan growth topping 19%—a modern-day record that outpaces the 15.3% growth rate in 1994—credit union lenders face a less certain future and growing apprehension about the 2023 credit outlook.
As CUNA economists explain, continued high inflation, tight monetary policy, and a slowdown in economic activity may point to a recession toward the end of 2023 or early 2024, albeit a mild downturn without substantial job losses.
On the plus side, the strong labor market, pent-up demand, and healthy consumer savings may lead to the soft landing the Federal Reserve is striving for: reversing inflation without a recession.
Whatever the outlook, credit unions are flexing their creative muscles in the lending arena. Orange County’s Credit Union in Santa Ana, Calif., for instance, found success and addressed a community need with a mortgage program that expands access to affordable housing.
The $2.4 billion asset credit union partners with community land trusts to finance affordable multifamily homes in Southern California. The condominiums, valued between $750,000 and $850,000, sell for $450,000 to $500,000 due to a subsidy provided by a community land trust.
SPIRE Credit Union in Falcon Heights, Minn., launched Property Assessment Clean Energy financing to make energy-saving investments affordable for commercial building owners. The $2 billion asset institution has participated in projects ranging from $30,000 to $2 million.
Fintech partnerships also allow credit unions to improve the member experience and unearth new lending opportunities. Facing growing competition from nontraditional lenders and larger providers, $354 million asset AgFed Credit Union in Washington, D.C., linked with a third party to provide student debt refinancing through participation pools. In addition to fueling loan volume, the program allows AgFed to connect with younger consumers.
While 2023 lending levels won’t reach 2022’s heights, this creativity and openness to partnerships will serve credit union lenders well.
BILL MERRICK is deputy editor at Credit Union National Association.