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CU HARP: Will it Play?

By Mary Arnold

Since I left this comment on Friday about the Member Mortgage Relief Initiative, which a group of credit unions proposed to NCUA, the agency looks like it is serious about backing it. In a press release yesterday, "NCUA unveiled a new initiative aimed at assisting credit union members who are experiencing mortgage-related financial difficulties to preserve their homeownership.

"The Credit Union Homeowners Affordability Relief Program (CU HARP) would enable NCUA, through the Central Liquidity Facility, to work with credit unions and their members in temporarily lowering monthly mortgage payments. The CLF would provide credit unions with funds borrowed from the Department of Treasury at lower rates than otherwise available through private sources. In turn credit unions would pass the entire rate reduction to struggling low- and moderate-income borrowers. The credit union, in exchange for the reduced likelihood of borrower default on the mortgage, would also match the rate break, doubling the benefit to struggling homeowners." 

“My principal reason for advancing CU HARP is simple: The consumer must not be left out of the broader government efforts to mitigate the housing and credit market dislocations,” stated Chairman Fryzel. “CU HARP is an effort to foster a solution whereby the NCUA and credit unions work together to assist distressed borrowers.  It represents what I believe to be an innovative and practical use of federal homeowner assistance that will also benefit credit unions and the market. At the same time, the standards and requirements for CU HARP participation will be stringent and will enable NCUA to be responsible stewards of any public funds used. CU HARP will be a ‘win-win’ for all involved.”

As part of that win-win, the plan involves no spending of taxpayer dollars, something CUs can continue to feel good about. "CLF loans are made to credit unions on a fully-secured basis, and all advances received by the CLF will be repaid to the Federal Financing Bank (an arm of Treasury) with interest," the release explains.

NCUA's announcement comes on the heels of last week's change to the bailout plan, which eliminated CUs' possible use of TARP funding. Though, theoretically, being eligible for TARP placed credit unions on "equal footing" with the rest of the financial industry, most credit unions are already on higher ground, thank you very much, and eager to help their members--not to obtain taxpayer assistance.

To go forward, CU HARP must be approved by the NCUA Board, as well as the Treasury Department and the Board of Governors of the Federal Reserve, according to NCUA's release.

Initial funding would be $2 billion. What do you think? Does this have legs?

Mary Arnold is VP/publications for CUES.

Creating our own Buzz

By Ron Jooss

Last week, Laura Jensen of 1st Pacific Credit Union, Vallejo, Calif., sent the following e-mail to CUES Net, our members-only e-mail discussion group, in response to a routine question about debit card policy. Note the last sentence, in particular.

"I rented a car from Alamo in San Diego. I made the reservation with my debit card. When I arrived to pick up the car, they refused to rent to me until I proved to them I had booked a return flight. Apparently there are renters out there who intend to pay by debit card when they return the car. The problem is they don't return the car… perhaps that is related to the excessive charges (sometimes charged to members when they pay for car rentals via debit card)?

Incidentally, I did show them my return flight itinerary, paid for the rental (with my debit card) when I returned the car, and had no issues with he charged to my debit card. And, I convinced the rental agent to transfer his Visa balance with Bank of America to any of the fine credit unions in San Diego!"

Obviously, Laura drinks the credit union Kool-Aid, as do so many of us who are involved with credit unions. But Laura's e-mail did cause me to pause. Do we all make the most of opportunities like this to sell people on the credit union movement? Sure, it's important, but more than that, we're lucky we work—and interact with each other—within an industry that we can so proudly share with people.

Can you imagine if you worked in the airline industry, or for a petroleum company. Nothing against the folks who punch the clock for companies within those industries. I once worked for a bank, and the people I worked beside were no different than the credit union people I work with today. I think everyone understands that.

But credit union folks are the rare people in the business world who can actually tell others that we offer a better deal for consumers. Not many people in the business world have that opportunity. I suggest we take advantage of it whenever we can.

Ron Jooss edits the General Management and Board sections of CUES' Credit Union Management magazine.

Read more marketing posts on the CUES Nexus Connection blog.

Main Street in Crisis–The Credit Union Difference

By Gary Easterling, CCE

Our members, our communities, and our nation need the credit union difference. Today is the day for the accumulated strength of the credit union movement to step up and give back to the member-owners.

Our banking cousins are "paying" for their obscene profits from recent years by squealing up to the TARP trough, allowing the taxpayer to pick up the tab for their greed. Credit unions have the opportunity to live our difference—meeting the needs of our members, our communities, and our country.

Banks have not expanded lending, even while accessing government funds. They repair their balance sheets, seek mergers and acquisitions, focusing on Wall Street performance, rather than Main Street need.

The credit union difference has always been absent the profit motive, greed from ownership. This is why credit unions did not make record profits in recent years. This is why credit unions are not paying the price for excessive risk today. This is why credit unions stand ready to help Main Street in crisis.

Action Plan–The Credit Union Difference. The credit union difference action plan is to demonstrate our willingness to rush into the panic with a helping hand. While others are fleeing with their hands filled with personal wealth, the credit union difference can spurn the personal profit motive and provide a lift to an ailing economy. Our action plan is three-fold.

First, our credit unions must join together in service to our members. Serving our members is why we exist. It is the right thing to do. The need is real, the crisis is now, and urgency is the watch word. It is good business and through member referral you will grow market share.

Second we must document our story. It isn't enough to do the right thing; we need to capture the details of our actions. By documenting our story we place it in the context of our response plan to the current economic crisis.

Third we must share the story with our community, our legislators, and our regulators. Credit unions have long identified themselves as the best kept secret. Telling our story is essential. Our members, our communities, our country needs to know credit unions are here with a solution.

Our message to our legislators should be: The only thing restricting our ability to stimulate our economy is:

• legislation that restricts member access to credit unions (FOM limitations);
• legislation that restricts our service to the business community (business lending cap);
• legislation that restricts our capital requirements (risk-based capital); and
• legislation that restricts access to more capital (secondary capital).

Our message to our regulators is that capital belongs to our members, and in our current economic environment we plan to use our capital to help our members get through this recession.

Tactics–The Credit Union Difference. Margins are tight, but rather than building capital on the backs of our membership, we need to shrink our margins to return more value to our members, stimulate our local economy, and pull our country out of the recession.

Net income is precious, but we need to engage our members and potential members with the message, "We are here for you"; or as my credit union's tag line says, "We'll get you there." The best kept secret needs to be secret no more. Spend some money and get the message out. Our members deserve to know we are here to help them.

It's time for a little charitable service. Return to our tradition: not-for-profit, not-for charity, but for service. For years we have built up capital. We like our capital. It is for safety and soundness. Our regulators like our capital. It is our rainy day fund. We say our capital belongs to our members. Well I've got news for you, our members are standing in the rain and we have the umbrella they need. We have the opportunity, the capacity, and the duty to help them. This is not the time to build capital on the backs of an overly burdened membership. This is the time to live our motto: People helping people.

Leadership–The Credit Union Difference. Leadership in this crisis and responsiveness to the need will serve us well in the state houses and on Capitol Hill. As the lawmakers stew and brew tighter oversight and increased regulation, our credit union movement, highlighting our heroes in action, can gain new powers in the face of tighter regulation as part of our economic stimulus. It is not enough to claim we were not part of the problem; we must demonstrate we are part of the solution.

There is need for reform, but not all reform should be tighter controls. Do we need improved oversight where personal greed can bias corporate actions away from public good? Yes! Do we need to empower and enable organizations that have embedded in their corporate DNA service to the public good? Yes!

Coming together as leaders we can finally demonstrate the credit union difference to our members, our communities, and our lawmakers.

Gary Easterling, CCE, is president/CEO of $745 million United Federal Credit Union, St. Joseph, Mich.

Read another post by Gary Easterling.

CEO Network: Be There or Be Remote

By Mary Arnold

Over the last few weeks, Christopher and Ron have been introducing you to some of the CEO Network speakers who will help make next week's conference as relevant and up-to-the-minute as possible for attendees. CUES CEO Fred Johnson has also talked about how CUES is offering a pay-what-you-can option to help more executives attend--and collaborate--during these tough economic times.

Now, I'm excited to report that you don't even need to travel to Las Vegas to take advantage of at least some CEO Network content. CUES members can listen in to four sessions via live, streaming video. You can even text in questions!

Here are the sessions and times (all except Dennis Dollar are on Monday, with Dollar's election day perspecitives on Tuesday):

• Ben Stein, actor, economist and speaker, Santa Monica, Calif.—"Life, the Economy, and What's Next," Monday, Nov. 3, 8-9 a.m. Pacific Standard Time
• Tom Gardner, one half of the Motley Fool—"Market Update: Where We've Been, Where We're Going, and How it May Affect Your Business," Monday, Nov. 3, 3:45-4:45 p.m. Pacific Standard Time
• David W. Colby, chief economist, CUNA Mutual Group, Madison, Wis.—"Managing Through the Economic Cycle and Charting a Course for Strategic Success," Monday, Nov. 3, 11:15 a.m.-12:30 p.m. or 2:15-3 p.m. Pacific Standard Time
• Dennis Dollar, former NCUA chairman and principal, Dollar Associates, Birmingham, Ala.—"Election Day 2008: A Credit Union Insider's Perspective on What Election Day 2008 May Bring," Tuesday, Nov. 4, 8:-9:30 a.m. Pacific Standard Time

Hope to see some of you in Vegas--if you're there, look me up! If not, be sure to tune in. I virtually attended some Forum Symposium sessions earlier this month and it really was the next best thing to being there.

Mary Arnold is VP/publications for CUES.

CUs: The Next 100 Years

By Mary Arnold

In honor of the 100th anniversary of U.S. credit unions (our Canadian friends already reached this esteemed mark in 2000), CUES will be proposing a toast during CEO Network's awards banquet. And I'm looking forward to lifting my glass high to celebrate this accomplishment with all of you who will be in attendance.

With all that's going on in the financial world these days, an anniversary might not seem like something to spend a lot of time and thought on. But just as Morriss reminded us on International Credit Union Day, it's good to stop, if only briefly, to remember what makes credit unions great and what an important impact you have on members' lives.

Many federal credit unions were formed during The Great Depression (or, as my daughter so aptly calls it, The Desperation). People needed credit unions then, just as they need them now.

But that's just my two cents. How do YOU think credit unions have distinguished themselves in the marketplace in their first 100 years? And, even more important, what are your hopes for the next 100?

Mary Arnold is VP/publications for CUES.