Loan Modification

Texas Blames Federal Government for Mortgage Crisis

By Jay Hammond

The majority of Texans surveyed voluntarily blame the federal government for causing the current economic crisis.

Results from a survey of 800 Texas registered voters released by the  Texas Credit Union League (TCUL), Texans point the finger at some aspect of the federal government more than they do at private business or individuals. The largest percentage, 16 percent, of those surveyed lay the blame directing at the feet (or on the shoulder of) former President George W. Bush.  Fourteen percent say it is Congress’ fault, however, 14 percent also blame ?banks?, but not credit unions,while another 14 percent blame ?greed/people spending too much?. The three-way tie for second is followed by the federal government (10 percent), mortgage companies/lending institutions (6 percent), Wall Street (4 percent), large corporations (4 percent), President Barak Obama (3 percent), con artists like Bernie Madoff (2 percent) and, barely mentioned, the Federal Reserve (1 percent).

?We’re delighted, but not surprised, to continue see [sic] credit union [sic] consistently rank at the most popular of any financial institution today,? said Buddy Gill, TCUL’s Chief Advisory Officer. ?Credit unions weren’t part of the problems that caused the national financial crisis, but we can be part of the solution to get our country bank on its feet.?

Credit Unions and the Mortgage Crisis

While credit unions may or may not bear some of the responsibility for the current financial and mortgage debacle, they have not been unaffected by it. In April 2008, the Wall Street Journal (WSJ)  reported that the nation’s five largest credit unions (at the time U.S. Central Federal Credit Union (FCU), Western Corporate (WesCorp) FCU, Members United Corporate FCU, Southwest Corporate FCU and Constitution Corporate FCU) reported unrealized losses totaling more than $5 billion. These paper losses, according to the WSJ were enough to wipe out the net worth of each of these five large credit unions. Only Southwest Corporate FCU is headquartered in Texas. All five are among the 23 credit unions nationwide participating in the  National Credit Union Administration’s (NCUA) Voluntary Temporary Corporate Credit Union Share Program (TCCUSGP), a voluntary guarantee program effective from March 1, 2009 to December 31, 2010 which provides members of participating credit unions having National Credit Union Share Insurance Fund (NCUSIF) with excess coverage above $250,000.

Mortgage-related troubles did not end there for these credit unions. The Bank Implode-O-Meter blog reported in March 2009 that Western Corporate Federal Credit Union was one of two credit unions placed into conservatorship by the National Credit Union Administration Board (NCUAB). Members United Corporate Federal Credit Union is, according to the Milwaukee Business Journal, one of the secured creditors of Central States Mortgage, a now defunct mortgage bank that credit unions held 70 percent ownership of.

Credit Union Regulatory News

On June 1, 2009, the NCUA joined with other Federal financial institution regulatory agencies in issuing a public comment on the proposed rule to implement S.A.F.E. Act Mortgage Loan Originator Registration Requirements. The  S.A.F.E. Act requires Agencies to jointly develop and maintain a system for registering residential mortgage originators who are employees of national and State banks, savings associations, credit unions and Farm Credit System institutions as wells as certain of their subsidiaries. Employees not registered with the Nationwide Mortgage Licensing System and Registry (let’s hope they change the name before it gets confused with Nationwide Insurance, a completely separate and commercial enterprise) would be barred from originating residential mortgage loans. When the system is fully operational, consumers will be able to use unique identifiers to access employment and other background information about registered mortgage loan originators. However, because of the complex technical issues involved in modifying the Registry to accept Federal registrations, the Agencies support a proposed rule delaying implementation of the registration requirements until 180 days after the Registry becomes operational and available for federal registrations.

A proposal has also been made by the Federal Housing Finance Board and the Federal Housing Finance Agency that would open Federal Home Loan Bank membership to non-federally insured Community Development Financial Institutions Fund-certified institutions, including credit unions. The proposal would implement provisions of the 2008 Housing and Economic Recovery Act and deem institutions authorized by federal or state law to join, purchase stock in, do business with and maintain deposits in the FLHB as along as they have at least 10 percent of their assets in residential mortgage loans or are a ?community? financial institution. Previously, FHLB membership was limited to federally regulated and insured institutions and their holding companies.

The Bureau of Labor Statistics (BLS) defines a credit union as a depository institution formed by people with a common bond. This bond, or community, might be working in the same company or industry, belonging to the same labor union, church or other organization, or attending/working at the same educational institution(s).

Credit unions often offer loans at lower rates than banks or other financial institutions because they pool members savings. Texas voters favor eliminating the 12.25 percent asset cap placed by Congress years ago on business loans, according to the TCUL survey. Participants see lifting the cap as a viable way to help get credit into entrepreneur’s hands at a time when many other financial institutions are pulling back on lending.

Overall, credit unions experienced a decline in lending activity and net worth during the first quarter of 2009, according to NCUA statistics. First mortgage real estate loans and lines of credit, however, grew by 1.5 percent. The delinquency rates also increased to 1.44 percent. This was the smallest quarterly increase experienced in more than a year.

?Reflecting the unstable economy and typifying the normal first quarter influx of funds, credit union members were strong depositors posting gains in every category of credit union share and savings account in the first three months of 2009,? NCUA Chairman Michael Fryzel noted. ?The unstable economy slowed lending, with the exception of mortgage lending primarily due to historically low 1st mortgage loan rates.?

The Texas Credit Union League(TM) is the official trade association for credit unions in the State of Texas and represents nearly 600 credit unions with more than 7 million members state-wide. TCUL regularly monitors public opinion on political and public policy issues affecting the financial services marketplace.

Full post as published by Blown Mortgage on June 03, 2009 (boomark / email).