Filene's Hoel says recession is a time for credit unions to thrive

<p>TOTAWA/DEPTFORD, N.J. – Credit unions can increase their loan portfolios in the midst of the current recession by marketing a variety of refinancing opportunities to members in good standing. This was the key point Robert Hoel made to credit union administrators at two educational sessions held at North Jersey FCU, Totowa, and The Fairfield Inn, Deptford, on January 29 and 30, respectively. In a presentation entitled “Big Opportunities for Credit Unions During a Recession,” sponsored by Credit Union Affiliates of New Jersey, Hoel, executive director for the Filene Research Institute, Madison, Wis., also commented that a majority of credit union members do not conduct all of their business with their credit union. It is the credit union’s responsibility to get that “other business.” Credit unions rank higher in customer satisfaction than banks, but unfortionately they do not receive 100% of member loans. Citing statistics from CUNA’s “Credit Unions Today & Tomorrow” survey, Hoel said that credit unions share of member loans are just: 42% for auto loans; 38% personal; 9% mortgages, 25% second mortgages and 20% home equity lines of credit. “Fifty percent of the time they will get loans someplace else,” said Hoel. These statistics, however, also offer credit unions the greatest opportunities, especially at a time of lowering interest rates, but they have to approach members in a manner that educates and piques the interest of a member without insulting their ignorance. “We encourage credit unions to sell loans with a `we can do a favor for these people’ mentality,” Hoel explained. The effort is important to credit unions because loan-to-savings ratios have dropped from 80% in 2000 and 74% in 2001, to 65% this year. Credit union loan growth has dropped from 11% to 5% in the same time period, while credit union savings growth increased from 6% in 2000 to 15% in 2001, and 10% this year. Hoel also said that credit unions’ mentality had to change. Referring to a Filene study of 600 credit unions that were successful during the recession of the early `90s, Hoel revealed that these institutions: found lending as critical to their success; didn’t agree that CUs cannot increase their lending because members didn’t want to borrow; were dissatisfied with their loan/savings ratio and planned to increase that ratio. “These 600 credit unions did not increase delinquencies and charge offs. They were just getting a bigger share of their members’ borrowing needs,” said Hoel. “Credit union administrators and board members must have a `passion for lending.’ They should focus an risk management rather than avoiding risk,” he said. Focusing on the needs of the average member is not the way to increase loan-to-savings ratios, either. Hoel said credit unions should also focus on, for example, aging baby boomers who have 10 years left on their mortgage and may consider refinancing, and even commercial or small business loans. “A recession is a great time to get more money,” Hoel concluded. -</p> <p>[email protected]</p>