Monday, November 20, 2017

GOP Lawmakers Urge HUD to Review and Amend Out-of-Date Disparate Impact Rule

A group of Republican lawmakers wrote Housing and Urban Development Secretary Ben Carson on November 15th about the agency's out-of-date disparate impact stating that the rule is inconsistent with current Supreme Court precedents on disparate impact theory and could be negatively affecting HUD’s housing goals.

“Local governments, commercial and residential lenders, issuers, developers, and other mortgage industry service providers are less inclined to participate in housing projects because HUD’s disparate impact rule does not comply with the Supreme Court’s rulings,” the lawmakers wrote. “This inconsistency will reduce housing production, which in turn will increase housing expenses for many Americans, including those who can least afford it.”

The lawmakers urged HUD to make changes to the rule, adding that it “is a prime candidate for reconsideration” under an executive order issued by President Trump earlier this year calling on agencies to evaluate outdated, unnecessary or ineffective regulations, as well as those that impose costs that outweigh benefits.

Below is the letter.

Friday, November 17, 2017

IH Mississippi Valley CU to Build New $26 Million HQ, Project Receives Tax Incentives

Moline City Council approved the city's development agreement with IH Mississippi Valley Credit Union (Moline, IL).

The city will sell property to the $1.2 billion credit union for $2.925 million, which will be used to construct an 80,000-square-foot, four-story facility.

As part of the agreement, IH Mississippi Valley will receive a tax increment financing (TIF) incentive payment of up to $3.9 million, or 15 percent of the $26 million project. The credit union also will be rebated for eligible TIF expenses, including site work up to $525,000. The total incentive package is up to $4.425 million, which equals 17 percent of the total cost of the project.

One city alderman objected to an incentive package as the credit union does not pay income tax.

Read the story.

Read the agenda of the City Council meeting.

Thursday, November 16, 2017

Taxi Medallion Loans Impact Two NJ CUs

Several New Jersey credit unions with exposure to taxi medallion loans experienced additional deterioration in their financial performance.

First Jersey Credit Union (Wayne, NJ)

The $91 million credit union recorded a year-to-date loss of $5.8 million at the end of the third quarter. The loss was ties to a $4.6 million year-to-date increase in provision for loan and lease losses.

As a result of the loss, the credit union's net worth fell to slightly less than $2.2 million. At the end of the third quarter, the credit union was significantly undercapitalized with a net worth ratio of 2.40 percent, down from 3.80 percent as of June 2017.

The credit union reported $5.6 million in delinquent loans. This was down from $6.3 million from the previous quarter. The percent of loans 60 days or more past due was 8.88 percent as of the most recent financial performance report. Delinquent loans as a percent of net worth were 256.29 percent.

Delinquent commercial loans not secured by real estate -- presumably taxi medallion loans -- were almost $4.6 million as of September. The delinquency rate on these loans was 35.05 percent.

In addition, troubled debt restructured commercial loans were nearly $4.7 million.

The credit union reported a September 2017 net charge-offs of $2.3 million, of which $2 million was commercial loans. The net charge-off rate was 4.60 percent; but the net charge-off rate for commercial loans was 17.54 percent -- up from 4.37 percent from a year ago.

Due to the increase in provision for loan and lease losses, the allowance for loan and lease losses was $6.8 million. The coverage ratio was 121.64 percent as of September 2017, up from 114.63 percent on June 2017.

Over the last year, assets at the credit union shrunk by $34.2 million. During the last quarter, assets fell by $10.4 million.

Aspire Federal Credit Union (Clark, NJ)

Aspire FCU reported a year-to-date loss of $5.8 million as the credit union seeks to build reserves to cover bad taxi medallion loans. The $161 million credit union reported almost a doubling of provisions during the third quarter from $3.4 million to $6.7 million.

As a result of the loss, the credit union's net worth fell from $17.5 million at the end of 2016 to $11.7 million as of September 2017. The credit union's net worth ratio dropped by 283 basis points to 7.28 percent.

Delinquent loans rose during the last quarter from $8.2 million to $9.2 million. The delinquency rate on loans rose 106 basis points to 7.21 percent.

Commercial loans not secured by real estate -- presumably taxi medallion loans -- accounted for almost half of the delinquent loans ($4.5 million). The percentage of these commercial loans 60 days or more past due was 34.52 percent.

The credit union is reporting net charge-offs of $2.8 million as of September 2017. The net charge-off rate was 2.80 percent.

Troubled debt restructured commercial loans were approximately $3.9 million at the end of the third quarter of 2017.

Due to the increase in provisions for loan and lease losses, the credit union's allowance for loan and lease losses jumped from $4.3 million at the end of 2016 to $8.2 million as of September 2017. The credit union's coverage ratio was 88.73 percent -- up from 58.64 percent at the end of 2016.

Wednesday, November 15, 2017

Losses to NCUSIF from Taxi Medallion Could Reduce or Eliminate NCUSIF Distribution in 2018

Losses from taxi medallion loans to the National Credit Union Share Insurance Fund (NCUSIF) could jeopardize 2018 distribution from the the NCUSIF.

According to a presentation at the New York Credit Union Association's Credit Union CEO Roundtable in May 2017, the estimated losses from taxi medallion loans to the NCUSIF could be between $200 million to $719 million.

Below is the slide.


If losses from taxi medallion loans to NCUSIF come in at the upper end of the range, it would be in the middle of the range of the projected NCUSIF distributions of $600 million to $800 million in 2018.

In fact, Chairman McWatter cautioned during the the September National Credit Union Administration (NCUA) Board meeting, "a large increase in insurance losses ... could reduce or eliminate the projected distributions."

As of September 2017, NCUA has only set aside $286 million in reserves for insurance losses, of which $20.1 million is for specific natural person credit unions. In the case of large losses from taxi medallion loans, this $286 million in reserves would not be sufficient to cover these losses. This means NCUA would need to significantly increase reserves to cover these insurance losses going forward.

To maintain the new NCUSIF normal operating level at 1.39 percent, this would require either a reduction or elimination of the 2018 distribution.

Therefore, credit unions should not count their chickens until they are hatched.


Tuesday, November 14, 2017

Low-Income CU Secures $12 Million in Secondary Capital

Jefferson Financial Federal Credit Union (Metairie, LA) recently completed the first funding installment of its National Credit Union Administration-approved $12 million secondary capital plan.

The $563 million low-income credit union worked with CU Capital Market Solutions (CMS) of Overland Park, Kansas to develop a secondary capital plan, prepare its NCUA application and fund the capital.

The second installment of Jefferson’s secondary capital will be provided by CMS through an exclusive arrangement with CU Secondary Capital Fund.

Read the press release.

UtahPolicy.Com Calls for Scrutiny of CU Tax Exemption

UtahPolicy.Com is calling on Senator Orrin Hatch (R - UT) and Congress to scrutinize the tax exempt status of large credit unions.

According to LaVarr Webb -- the publisher of UtahPolicy.com, some tax credits and exemptions are still warranted, while others are no longer justified.

Webb writes that small traditional credit unions serving people of modest means and having a true common bond should retain their tax exemption.

However, Congress should scrutinize the tax exemptions of credit unions with more than $500 million in assets.

Webb argues that these large impersonal credit unions are just like banks and have no meaningful common bond.

This tax exemption unfairly tilts the playing field in favor of these large credit unions relative to community banks.

Read the commentary.



Monday, November 13, 2017

Delinquencies Up Almost 25 Percent During Q3 at Taxi Medallion Lender Progressive CU

Troubled taxi medallion loans caused a decline in asset quality at Progressive Credit Union (New York, NY) during the third quarter of 2017.

Progressive Credit Union had $74.2 million in delinquent loans at the end of the third quarter of 2017. Delinquent loans were up 24.8 percent during the quarter. The percentage of loans past due was 15.81 percent, up from 12.24 percent from the previous quarter.

The credit union also reported $54.2 million in net charge-offs, as of September 2017. The net charge-off rate on average loans was 13.77 percent.

In addition, outstanding troubled debt restructured loans were $120.5 million.

At the end of the third quarter, the credit union has $26.9 million in foreclosed and repossessed other assets, presumably taxi medallions.

Due to the decline in asset quality, the credit union increased provision for loan and lease losses to build its allowance for loan and lease losses.

Provision for loan and lease losses was $59.9 million at the end of the third quarter, up from $40.4 million from the prior quarter.

Through the first 3 quarters of this year, allowance for loan and lease losses increased by $5.7 million to $76.8 million, as of September 2017. The credit union's coverage ratio dropped to 103.59 percent during the quarter from 115.54 percent and since the beginning of the year from 107 percent.

As a result of the increase in provision for loan and lease losses, the credit union reported a year-to-date loss of $65.7 million, as of September 2017.

This loss caused the credit union's net worth to fall from almost $195 million at the end of 2017 to $129.2 million as of September 2017. The credit union's net worth ratio tumbled from 32.96 percent to 25.77 percent over the same time period.

 

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