Short on funds, Texas CUSO turns attention to mortgage counseling for low-income members

<p>EL PASO, Texas -El Paso Credit Union Affordable Housing LLC hasn’t given up its goal of being self-sufficient and providing mortgage loans to low-income El Pasoans, but the affordable mortgage lending CUSO has been forced to reevaluate its priorities for the time being until it finds adequate funding. Inspired by a low-income mortgage lending CUSO that’s wholly-owned by a credit union in Vermont, Ray Ponteri, president/CEO, El Paso Employees FCU was tapped by the Texas Credit Union Foundation to see if he could set up a similar type of CUSO in El Paso, with one major difference from the Vermont CUSO – the initiative in Texas would be owned by several CUSOs. A former Vista volunteer, Ponteri admitted, “I didn’t know where to start when they first approached me about setting up the CUSO. I had a concept from learning about the Vermont CUSO, but I had to put it into a plan that would allow multiple credit unions to be able to participate.” Deciding which credit unions to invite to participate in El Paso Credit Union Affordable Housing LLC was the easy part of setting up the CUSO because the credit union community in El Paso is relatively small, said Ponteri. Including El Paso Employees FCU, eight credit unions own a share of the CUSO. They range in size from $13 million to $318 million in assets. Besides EPEFCU, the other seven credit unions are: El Paso Area Teachers FCU, El Paso Bell FCU, Fort Bliss FCU, Golden Key FCU, Government Employees CU of El Paso, Mountain Star FCU, and West Texas CU. What’s proven to be more difficult is for the CUSO to find the $4 million it estimates it needs to fund the 100 mortgage loans it’s figured the CUSO needs to be self-sustaining. Right from the start, the CUs’ goal for the CUSO was that it should be a self-sufficient program. Although it initially was funded by a $35,000 grant from TCUF, Ponteri said, “We didn’t want to have to always be looking around for grants to sustain the CUSO. We saw this as a long term program and one that should be able to sustain itself.” Based on results from research conducted by the credit unions on the El Paso community and feasibility of the CUSO, the CUs estimated the population that could benefit from the CUSO’s services is about 19,000 households. “There are enough low-income households in El Paso to keep us in business for a long time,” said Ponteri. The plan calls for the CUSO to hold the loans it makes for a year, and at that point it will either sell the loans to participating CUs or on the secondary market. The money the CUSO gets from selling the mortgage loans will go back into funding new loans. The interest the loans earn for the year will go towards paying the salaries and other overhead expenses for the CUSO. Larry Garcia, a business consultant and a member of the board of one of the participating credit unions, has been hired as director of the CUSO. Mortgage agreements will be based on standard mortgage terms with “normal” market interest rates. There will be no risk-based lending, and the maximum the CUSO will lend is $75,000. “You have to realize we’re going to be dealing with people who would otherwise have had to go to subprime lenders or worse for loans,” said Ponteri. “So why would we want to charge them exorbitant interest rates?” Ponteri said potential clients for the CUSO will include members of the participating credit unions, as well as people from the general El Paso community who are not members but who learn about the CUSO through CU solicitations. In the latter case, the CUSO will refer these participants back to one of the credit unions they’re qualified to join. On paper the plan sounds good, except that El Paso Credit Union Affordable Housing has run into a major problem: “The problem is getting the $4 million,” says Ponteri. At press time, the CUSO was still soliciting foundations, such as the Ford Foundation, for the money. So far, the National Credit Union Foundation has committed $225,000 over three years to help develop El Paso Credit Union Affordable Housing. The CUSO is not deterred from its plan to become a model program for the U.S. credit union movement. While it continues to solicit for additional funding, El Paso Credit Union Affordable Housing is focusing on getting the mortgage lending counseling portion of its business up and running. Ponteri said even if the CUSO doesn’t get the additional funding to make mortgage loans, it will continue to operate the counseling component of the CUSO. In the meantime, El Paso Credit Union Affordable Housing has been working closely with the El Paso Housing Authority and has closed 10 mortgages for participants of the housing authority’s mortgage lending counseling program who have received downpayment assistance from ELHA. Ponteri said another 50 loans are in the pipeline. Kelly Cooke, president/CEO, Fort Bliss CU is confident El Paso Credit Union Affordable Housing will receive the necessary $4 million in funding for mortgage loans. “The market place has a plethora of affordable mortgage packages that are sponsored by government agencies. There are a lot of people out there working to address the pervasive problem of the lack of affordable mortgages for low-income consumers. Part of our challenge is getting to know the organizations and foundations out there, and getting them to know us.” -</p> <p>[email protected]</p>