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Wondering how credit unions are fairing these days?

1. Is my money safe at a credit union?
2. Is it more difficult to get a loan now?
3. I'm in a financial bind. What should I do?
4. Are credit unions healthy?
5. Have credit unions been part of the banking "bailouts"?
6. How have credit unions been affected by the mortgage crisis?
7. Is it true that credit unions are seeing a resurgance?

1. Is my money safe at a credit union?

Yes. Just as the FDIC does for banks, the National Credit Union Administration, an agency of the federal government, insures a member’s savings up to at least $250,000. Coverage may be higher for a member with a combination of individual, joint, trust, payable-on-death and other types of accounts. Separate coverage of up to $250,000 covers individual retirement accounts. Because insured deposits are backed by the full faith and credit of the U.S. Government, not one penny of insured savings has ever been lost by a member of a federally insured credit union. And no taxpayer funds have ever been used for a bailout. To determine insurance coverage, NCUA provides an insurance estimator. And for more on federal share insurance, see the NCUA brochure “Your Insured Funds” available at your credit union.

2. Is it more difficult to get a loan now?

While that may be true of some lenders, it generally is not with credit unions. Credit unions have billions of dollars to lend and continue granting the same safe loans they always have using much the same criteria because they haven’t changed their underwriting standards. In fact, they are doing a better job meeting the borrowing needs in their communities than many large institutions. Because of how credit unions are owned – by their members instead of a small group of shareholders seeking profits – they are willing to make smaller loans that are considered “too small” by other institutions. So credit unions offer needed services whether or not they make a dime in doing so. Credit unions are also more willing to extend help when other lenders won’t because of the close nature of their member relationships; credit unions take the whole person and their situation into consideration when making loan decisions.

3. I’m in a financial bind. What should I do?

Talk to your credit union immediately, especially if you've fallen behind on your mortgage payments. Like most lenders, credit unions are seeing people faced by hard times – job losses, health problems, bills piling up, and bad loans obtained from other lenders. But because credit unions are in business to help their member-owners, not to make profits for a few shareholders, credit unions have refinanced members out of bad loans and have helped countless members weather a tough financial situation while preserving their credit history. In fact, almost 80% of Wisconsin credit unions we surveyed in fall of 2008 offer secured credit cards, debit cards, loans or other programs designed to help members build or rebuild creditworthiness.

4. Are credit unions healthy?

Yes. They are among the healthiest institutions in the nation. That’s because they didn’t engage in the risky lending that created our nation’s financial crisis. In fact, Wisconsin credit unions’ delinquency ratio is a modest 1.21% and the charge-off rate – or the amount of loan dollars expected to be unrecoverable – is an even slimmer 0.35%. What’s more, Wisconsin credit unions are well capitalized, meaning they have funds set aside to help them weather economic downturns such as this. Wisconsin credit unions’ average capital-to-asset ratio is a very solid 10.75%. In dollars, that’s a capital cushion of almost $2 billion. Credit unions are also tightly regulated. The Office of Credit Unions, a state agency headquartered in Madison, WI., reviews the financial health and safety of all state-chartered credit unions and the rest – those with federal charters – are scrutinized by federal regulators with the NCUA. Your credit union can provide its latest annual report or statement of financial condition upon request.

5. Have credit unions been part of the banking “bailouts”?

No. Credit unions did not receive any of the more than $700 billion in federal funds made available to banks. But that doesn’t mean credit unions didn’t take proactive steps on their own to preserve the vitality of the industry. For credit unions, that meant tapping dollars from their own self-funded insurance system – the National Credit Union Share Insurance Fund (NCUSIF) – to stabilize their corporates. Corporate credit unions don’t serve the public, but act as a “credit union’s credit union.” Local credit unions use them to invest and ensure they have the funds to serve members. The corporates’ broad exposure in securities markets – which have declined sharply – could have prevented the flow of loans locally. But credit unions didn’t wait for that to happen. They used $5 billion from the NCUSIF to plug those holes and preserve a solid flow of safe, affordable credit.

Needless to say, an entire industry taking care of itself with its own funds hasn’t made many headlines, but by doing so, credit unions have remained strong, active lenders. While it is uncertain how much in losses the corporates may see (it may be less than anticipated), credit unions have recognized the cost of replenishing their insurance fund on their financial statements. Many will see losses in 2009 as a result. But the process is in flux; options are being explored that could change how and when these costs are managed. Regardless, credit unions feel a “down year” is a small price to pay to preserve members’ access to affordable credit. Just in case, credit unions have also asked Congress for access to federal funds – only as loans – should that become necessary to further protect their members.

6. How have credit unions been affected by the mortgage crisis?

Most credit unions have experienced “collateral damage” in that members have been hurt by the sagging economy in general – and some may have obtained bad loans elsewhere, causing them to fall behind on certain payments. But credit unions have stepped up to help those members (see question 3). Credit unions have had some foreclosures in cases where members were overextended so far there were no other options, but nothing like what other institutions have seen. There has been one instance where a Milwaukee-area mortgage firm owned by a number of credit unions sustained significant losses, but the firm – Central States Mortgage Co. (CSMC) – is suing former members of its management alleging improper activities. While that is investigated, the firm continues strong mortgage lending on behalf of its shareholder credit unions, servicing between $30- and $40- million in mortgage loans each month. In fact, the firm reports that loan volume has actually increased as mortgage rates have come down. So aside from the alleged improprieties for which the firm is seeking restitution, its core mortgage activity remains strong. The credit union system has also tapped its own insurance fund (not supported by taxpayers) to close any gaps that would prevent a strong flow of loans to members locally (see question 5).

7. Is it true that credit unions are seeing a resurgence?

As of year-end 2008, Wisconsin credit unions saw some of the strongest membership growth in the nation. That is not surprising; in fact, the industry saw its greatest membership growth during the Great Depression and seems to be most in vogue when times are toughest. Media in Wisconsin and nationwide have taken note of credit unions’ safety, willingness to help consumers whose “modest” financial needs fail to interest the larger commercial lenders, and the tremendous satisfaction members are citing with service from their credit union despite these challenging times. And many Wisconsin citizens who have been disillusioned by their banks are turning on to the many benefits of credit union membership. They also feel good knowing that the financial institution they own is investing in the communities where they live through their many REAL Solutions.