By Mike Werstuik

Many call today the best buyer’s market in decades.  With interest rates reasonably low and prices down from the housing boom’s peak, the time to purchase a home is now…as long as you can get a loan.  The Federal Reserve’s March Senior Loan Officer Opinion Survey reported that 60 percent of the institutions surveyed have tightened lending standards on prime mortgages.  So while it may be a great time to buy a house, mortgages are harder to be approved for than they were in the past. 

The major focus in the media and within the financial services industry has been the refinancing of troubled mortgages.  The often-overlooked opportunity is in the purchase market.  And credit unions are in prime position to take advantage due to their avoidance of subprime lending and the fallout plaguing banks and others. 

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By Ray Cromer, CEO, Envision Credit Union

The key lesson we took away from 2007? Don’t Panic!  Having been in the credit union arena for over 40 years, this market cycle, too, shall pass.  Actually, Envision did better in 2007 than in 2006, because we stayed the strategic course in all the fundamental areas — core loan products and competitive savings rates — without trying to grow the assets.

We expect more of the same in 2008 and we expect a doubling of our net revenue over 2007.  While we’re well capitalized, we don’t want to be too conservative about growth in the asset base.  Our home loan portfolio is very strong and productive, as is, surprisingly, our credit card portfolio.  These will be the key product lines, while automobile loans have and will continue their trend down in importance in our mix.

Our strategy will be consistent and predicable in light of the credit markets meltdown.  However, we see a great opportunity in our CUSO to expand upon our offerings to the more than 85 credit unions we currently serve.  We believe that cooperation among credit unions via CUSOs is one way conservation of resources can take place, while exploring new ways of jointly providing the infrastructure each of our credit unions need for seizing upon new opportunities.  From data processing to human resources, from member business lending to managed network services, credit unions can benefit through collaboration and “co-opetition.”  CUSOs offer that final frontier where credit unions can still be friends with one another.

By Ron Burniske, CEO, Chartway FCU

Chartway is a consumer lending organization; as the individual markets are more saturated, the competition for one sale has become more intense. In 2007, we came to a realization that even the credit union industry has lost cohesion. Credit unions are competing with their brethren — opening branches across the street from one another to gain new business rather than serve the existing membership. For some, the cooperative spirit has deteriorated into “only if it doesn’t hurt us, then we’ll help”.
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By Larry Sharp, CEO, Arrowhead Central Credit Union

Arrowhead Central Credit Union finished 2007 with strong financial results despite its geographic location in the “eye of the storm” – California’s housing bust.  In preparation for a weakening economy, Arrowhead reduced operating expenses by 8.5% and balanced its loan portfolio.  Arrowhead ended 2007 with a Return on Assets Ratio of 1.41% and a Capital Ratio of 9.64%.  Arrowhead actively sold residential real estate loans into the secondary market, and spread portfolio growth among home equity, auto, recreational vehicle, and member business loans.

In 2008, Arrowhead sees opportunities to help members and to grow the Credit Union. Recent interest rate cuts by the Federal Reserve Bank will provide an opportunity for many members to refinance mortgages and reduce debt costs.  Also, legislation to increase the maximum lending limits on mortgage loans will give members new sources of lower cost financing.
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By Bill Connors, CEO, Purdue Employees FCU

We are in the low portion of a normal cycle. Previous good planning should carry you through, but some points to remember: Don’t panic; keep diversified; emphasize service over yield; stick to your mission; and maintain strong contact with members

The media has its horror stories and some credit unions made some very bad mistakes, but my 35-plus years of experience tells me: Don’t panic; this is part of a normal cycle. Frankly, I didn’t think some parts of it would be as bad as they have become but really what we are seeing is a predictable long-term ebb and flow. This isn’t the first time housing prices have dropped and it won’t be the last. We are going to get through it. This is what capital is for. Stick to your mission of creating member value and you should come through fine. Remember that there are always going to be good years and bad years – weather the storm. You don’t want to knee-jerk a solid strategy in the low point of a normal business cycle.

Below are a few points about managing through the cycle.
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