by. Matt Davis
Credit unions are in a crisis. The mortgage meltdown was the start. The over-tightening of regulator oversight exacerbated the problem. Weakened consumer loan demand added fuel to the fire. And credit union leaders’ subsequent move to avoid all risk made have made this bad situation worse.
But that’s not the true crisis. The crisis is our unwillingness to talk about the real issue. While there is pressure to keep delinquency ratios and allowances for loan loss in check, we have decidedly turned our backs on one of the core reasons credit unions are in business: making loans available to consumers for provident and productive purposes who can’t get help elsewhere. Our crisis is an underwriting problem. More to the point, we have an underwriting under-writing crisis.
So, I’ll start by telling my story (post-financial crisis)…
Two years ago I moved from North Carolina to Wisconsin. I called no fewer than five credit unions to get a mortgage, but none would help. I was moving from a contract position to a salaried position at the same company. I had worked in financial services for the past eight years. I had an 800+ credit score and was bringing nearly $55,000 to the table as a down payment. My debt to income ratio before and after the move made me creditworthy by any financial institution’s standards.
But I couldn’t get a loan.
I didn’t have enough work history, they said. Another said I’d have to wait until I moved to Wisconsin before I could apply (still don’t understand that one). This was too atypical of a case for underwriting.continue reading »