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Auto lending at U.S. credit unions was relatively robust in the third
quarter despite rising interest rates and slowing growth in the loan
Up 10.8% annually, total auto lending expanded $35.8 billion over the
year to $365.3 billion as of Sept. 30, 2018. This is the sixth
consecutive year of double-digit growth in the third quarter. Total auto
loan balances at credit unions have more than doubled since the third
quarter of 2012, and auto lending continues to be strong despite growth
slowing and interest rates rising in the overall loan portfolio.
Credit union auto market share has grown 5.9 percentage points in the
past five years to 20.6% as of Sept. 30, 2018. With the largest market
share of any major loan product, auto loans are essential to balance
sheet growth at credit unions.
Growth in indirect lending continued its three-year decline and was
down 3.8 percentage points year-over-year to 15.5%. Still, the financing
option remains a major origination pipeline for credit union auto
loans. Growth in indirect lending has outpaced total auto lending growth
for the past seven years.
Although the average auto loan balance is on the rise, credit unions
have effectively managed delinquency. New auto loans have the lowest
delinquency — 0.39% — of any lending product at the nation’s
member-owned financial cooperatives, and total auto delinquency
decreased 5 basis points over the year to 0.60% as of Sept. 30.
Strong vehicle sales in 2018 underpinned performance in the credit
union loan portfolio. The National Automobile Dealers Association
projects 2018 will be the fourth straight year of more than 17 million
unit sales nationwide and is forecasting 16.8 million unit sales in
2019. However, amid a rise in new car prices, consumer demand is
shifting from new cars to used ones.
A rise in off-lease used cars and lightly used vehicles are combining
to increase the supply of used cars and depress their prices. Elsewhere,
SUVs continue to grow in popularity, and some major automakers are
refocusing their product line. Ford, for example, has announced plans to
stop manufacturing sedans and coupes, except for the Mustang, and
produce only SUVs and trucks in North America.
WASHINGTON — For the first time in recent memory, the Federal Reserve
has indicated it doesn’t anticipate any additional rate increases. A
statement made following the just-concluded meeting of the Federal Open
Market Committee (FOMC) is a break from another statement made just a
month ago, and runs counter to the forecast from many that the Fed will
raise interest rates two times in 2019. In its statement, the Fed said the economy remains “solid” and that it expects economic growth to continue. But
the FOMC also said, “In light of global economic and financial
developments and muted inflation pressures, the Committee will be
patient as it determines what future adjustments to the target range for
the federal funds rate may be appropriate to support these outcomes.”
As it typically states following its meetings, the Fed said it
will continue to assess conditions relative to its objective of a 2%
inflation rate. The inflation rate has been sluggish for more than a
decade. Another Surprise In another surprise
announcement, the Fed also announced it is now ready to slow down or
even reverse its ongoing efforts to shrink its bond portfolio, even
though in 2018 it indicated it remained committed to doing so. After
amassing more than $4 trillion in Treasury securities and mortgage
bonds following the financial crisis, the Fed has been reducing its
holdings by approximately $45 billion per month. “The committee
is prepared to adjust any of the details for completing the balance
sheet normalization in light of economic and financial developments,”
the Fed said in a statement, indicating it is even prepared to increase
holdings if necessary. In addition, the Fed also issued a
statement that “after extensive deliberations and thorough review of
experience to date, the Committee judges that it is appropriate at this
time to provide additional information regarding its plans to implement
monetary policy over the longer run. Additionally, the Committee is
revising its earlier guidance regarding the conditions under which it
could adjust the details of its balance sheet normalization program.” Additional Statement Accordingly, the Fed said all participants agreed to the following:
The Committee intends to continue to implement monetary policy in a
regime in which an ample supply of reserves ensures that control over
the level of the federal funds rate and other short-term interest rates
is exercised primarily through the setting of the Federal Reserve's
administered rates, and in which active management of the supply of
reserves is not required.
The Committee continues to view changes in the target range for the
federal funds rate as its primary means of adjusting the stance of
monetary policy. The Committee is prepared to adjust any of the details
for completing balance sheet normalization in light of economic and
financial developments. Moreover, the Committee would be prepared to use
its full range of tools, including altering the size and composition of
its balance sheet, if future economic conditions were to warrant a more
accommodative monetary policy than can be achieved solely by reducing
the federal funds rate.
The Federal Open Market Committee will wrap up its two-day meeting today, which is not expected to end with a rate hike. The
committee last raised the federal funds target rate to the current
range of 2.25% to 2.5% at the end of its December meeting, the fourth
rate hike of 2018. Following the FOMC's meeting in December,
committee members pared its projection for 2019 from three rate hikes to
just two. President Trump has been critical of the rate hikes, and some
members of the FOMC have indicated they do not feel as strongly as they
have in the past about raising rates given recent economic data.
NEW ORLEANS, LA. — Auto Link announced
today that the company has filed with the US Patent & Trademark
Office for a patent that covers the ability to seamlessly embed a
third-party, white-label website into a host website.
The normal method of embedding a third-party web content into a host
website is using an iframe. However this method is not seamless
and introduces several inconveniences and difficulties for the
end-user, as well as obvious visual cues indicating the content is from
The patent application is for a system and method that, among other
things, places all the typical auto research, buying, and financing
tools seamlessly on the Credit Union's website and out of the view
of the internet advertising companies such that the Credit Union
may be competitive in the auto lending market and achieve its
mission of enhancing the financial well-being of its members.
The internet has caused a significant paradigm shift in how consumers
research, buy, and finance vehicles. A typical consumer today will
spend ten or more hours online researching prior to buying a vehicle.
Consumers are bombarded with auto loan and finance options while
performing this research, and many of these finance options come with
instantaneous approval. Additionally, cookies from various automobile
research sites are placed on the consumer's internet device, which
further instructs banners on webpages how to gear their ads. As a
result, the majority of auto loans are now made via the internet and at
auto dealerships where the financing and auto protection products are
not as consumer friendly as they would be at a Credit Union.
“The internet is here, it's real, and consumers are increasingly using
the internet for shopping for everything from clothes, to homes and
cars,” said Auto Link CEO Edward Bourgeois.
Bourgeois said this patent is a step towards preventing credit unions
with more limited resources than big fin-tech companies from going the
way of organizations like Blockbuster that refused to embrace new
“As a technology and marketing company, with a specific goal of keeping
Credit Union's relevant and competitive in the auto finance space, we
are excited to be able to quickly and seamlessly bring our patent
pending Auto Link Solution to credit union's nationwide; guaranteeing
their member-owned competitive advantage will survive and thrive in the
new auto lending paradigm,” said Bourgeois.
About Auto Link
Auto Link offers a best in class solution for credit unions of all
sizes looking to have a more successful and profitable auto-lending
program, including those that do indirect auto financing. Auto Link
provides a complete auto lending solution from web interface, marketing
library, social media portal, training tools and analytics to a
built-in loyalty feature. Each member that finances a vehicle at an
Auto Link credit union, automatically receives a myEZ Car Care
membership filled with discounts at over 10,000 locations nationwide
and an Electronic
Glove Box® desktop and mobile app.
Dear Board of Directors and Chief Executive Officer:
This letter outlines the NCUA’s primary areas of supervisory focus for 2019, and is intended to assist you in preparing for your next NCUA examination.
Regarding the examination cycle and procedures to be employed, the extended exam cycle introduced in 2017 will be fully implemented in 2019.1 Consistent with 2018, agency examiners will continue using the streamlined small credit union exam program procedures for most credit unions that have assets under $50 million. For all other credit unions, examiners will conduct risk-focused examinations, concentrating on the areas of highest risk, new products and services, and compliance with federal regulations.
In 2019, NCUA examiners will have increased flexibility to conduct suitable examination work offsite. In the agency’s Flexible Examination Program (FLEX) pilot, examiners were able to conduct as much as 35 percent of examination time offsite.2 The NCUA expects this increased flexibility will reduce the time impact on credit unions, save on travel costs and increase staff productivity.
Supervisory Priorities for 2019
The following are the NCUA’s primary areas of supervisory focus for 2019.
Bank Secrecy Act Compliance
Examiners will perform more in-depth reviews of credit unions’ Bank Secrecy Act and anti-money laundering policies, procedures, and processes to assess compliance with regulatory requirements for customer due diligence and for identifying and verifying beneficial owner(s) of legal entity members. New Customer Due Diligence regulations for Financial Institutions (31 CFR 1010.230) became effective May 11, 2018. Examiners began assessing credit unions’ efforts to comply with the new regulations during the second half of 2018.
Examiners will have a continued focus on large concentrations of loan products and concentrations of specific risk characteristics. Concentration risk is defined as any single exposure or group of highly correlated exposures that have the potential to produce losses large enough to threaten a credit union’s health or ability to maintain its core operations. Excessive credit concentrations are a common cause of financial losses. If excessive levels of credit concentration risk are identified, examiners will work with credit union management to identify strategies to mitigate the risk.
As in 2018, examiners will continue to perform limited reviews of Home Mortgage Disclosure Act (HMDA) quarterly Loan/Application Registers, or full-year Loan/Application Registers when applicable. The reviews will evaluate federal credit unions’ good faith efforts to comply with 2018 HMDA data collection and reporting requirements. These reviews will account for the statutory partial exemptions that took effect on May 24, 2018. You can find information on the changes in the Consumer Financial Protection Update 18-01, Information about the Bureau of Consumer Financial Protection's 2018 HMDA Interpretive and Procedural Rule.
Examiners will review credit unions’ compliance with Regulation B’s notification requirements following adverse action taken on consumer credit applications. They will also review overdraft policies and procedures for compliance with Regulation E. For additional consumer compliance tools and resources, visit the NCUA’s Consumer Compliance Regulatory Resources website.
Current Expected Credit Losses (CECL)
While the CECL requirements may continue to evolve in 2019, examiners will inquire about efforts a credit union has taken to prepare for the new accounting standard, and whether a credit union has performed analysis for how CECL would alter the Allowance for Loan and Lease Losses funding needs. In June 2016, the Financial Accounting Standards Board (FASB) issued the new accounting standard introducing the current expected credit losses methodology for estimating allowances for credit losses, with an effective date of January 1, 2022 for most credit unions.3
Examiners will continue conducting information security maturity assessments with the Automated Cybersecurity Examination Toolbox (ACET). Examiners will use the ACET to assess credit unions with over $250 million in assets that have not previously received an assessment. The security, confidentiality, and integrity of credit union member information remains a key supervisory priority for the NCUA.
Two additional areas of supervisory focus for 2019 are the assessment of credit union IT risk management to ensure it effectively identifies, remediates, and controls inherent risks to appropriate residual risk levels, and oversight of service provider arrangements to ensure credit unions implement effective risk-based supply chain management. These areas of focus were established as a result of historical examination analysis, emerging threat trends, and sample results of ACET maturity assessments to date.
Examiner will assess liquidity and interest rate risk management, including the following:
The potential effects of rising interest rates on the market value of assets that affect changes to net worth and borrowing capacity;
Member preference shifts to shares with more market sensitivity; and
Credit union management’s ability to meet liquidity needs given the increased competitive pressures that affect share balances.
An effective liquidity and interest rate risk management program is a key component of a credit union’s safety and soundness. The projected economic fluctuations in 2019 make this an increased area of emphasis. When rates rise, it puts pressure on credit unions to raise deposit rates in order to maintain deposit account volume. Also, enhanced mobile and internet banking applications and non-bank financial technology may result in greater challenges to retain low cost core deposits compared to prior interest rate cycles.
Resources and guidance on interest rate and liquidity risk can be found in the online version of the NCUA’s Examiner's Guide.
If you have any questions about the agency’s supervisory priorities or 2019 examination program, please contact your NCUA regional office.
LOS ANGELES–Firefighters First Credit Union has announced it is paying a year-end bonus to members of $2 million.
Since 1981, the credit union has returned more than $46 million to members.
Firefighters First Credit Union said it rewards its members for having a strong engagement with the credit union, saying deeper membership engagement via investment accounts, insurance policies and business loans is greatly welcomed and an active growth strategy. “It is rare to find an organization today that shares any percentage of their profits. However, at Firefighters First Credit Union, this is part of our foundation. While many credit unions have ceased sharing their profits, we feel strongly about giving back to our members to help improve the financial lives of our Fire Family,” said President/CEO Dixie Abramian. “At the discretion of the board of directors, it is an important part of our tradition. The payouts vary based on member relationships – if you have a mortgage or a money market with us, your member payout will be much higher than if you have only an auto loan.”
Firefighters First said it continues to focus on providing terrific service to members, especially with a national expansion strategy now underway. The credit union currently serves approximately 544 fire departments nationwide.
Payouts represent a rebate on the interest paid on loan accounts and a bonus on the earning on savings accounts, the credit union said.
NEW YORK–How many times will the Fed raise interest rates in 2019? It’s a question of keen interest to credit unions, and the answer according to many investors is zero—the Fed will not act.
The current Fed funds rate is set to a range between 2.25% and 2.5%.The reason, according to analysis by the Wall Street Journal, is declining confidence in U.S. economic expansion, which is expected to slow over the next year even as the economy remains strong.
The Federal Open Market Committee voted to raise rates at its December meeting, finishing the year with a slow but steady effort to nudge rates upward. The rate increases have been met with criticism by President Trump. Many analysts, including inside credit unions, had predicted the Fed would raise rates twice more in 2019. Now, some are saying not so fast.
Fed Funds Futures Flat
“Fed-funds futures, which investors use to bet on the direction of Fed policy, on Wednesday showed a 91% probability that the central bank’s policy makers will finish the year with interest rates at or below their current level,” the Journal reported. “That is a reversal from early November, when futures prices indicated a 90% probability that rates would end 2019 higher than they are now. Futures even show a small chance that rates will fall this year—raising the possibility of a market shock or economic downturn by year’s end.”
The yield on the 10-year Treasury note also recently fell below 3%.
“In the two weeks since Fed officials last met, stocks have fallen, yields on corporate debt have widened relative to those on safer government bonds and other measures of financial conditions have tightened considerably,” the Journal reported. “By raising costs for businesses and households to borrow and invest, tighter conditions could slow growth more than central-bank officials anticipated.”
WASHINGTON–As the partial federal government shutdown stretches on, more credit union have announced offers of assistance.
The U.S. Office of Personnel Management, which handles human resources for the government's civilian workforce, has advised thousands of employees who won't be paid during the government shutdown to reach out to creditors in order to work out alternative payment schedules. OPM has even released sample letters it suggests federal workers affected by the shutdown use to ask for help from mortgage lenders and landlords.
The latest to offer help to members missing paychecks due to the shutdown include:
AmeriCU Credit Union in Rome, N.Y., which is offering interest-free furlough loans, fee refunds, and penalty-free certificate withdrawals. "We want to help alleviate the financial stress that a shutdown like this could cause our members,” Ron Belle, chief experience officer for AmeriCU, told local media. “We’re doing everything we can to make sure we’re here for our members with the right assistance and services when and where they need it.”
Mid Oregon Credit Union in Bend, Ore., which reported it has several hundred members who are employees of the Deschutes National Forest, Ochoco National Forest, the Fremont-Winema National Forest, BLM and US Fish and Wildlife Service. Mid Oregon is offering short-term loans, “skip-a-pays,” as well as a willingness to work with members on mortgage and auto loan payments.
Vermont State Employees Credit Union is offering a Member Emergency Loan (MEL), with a low rate on amounts up to $1,500. “It’s a frightening prospect to suddenly lose income at any time of the year, but winter in Vermont is an especially difficult time to find yourself suddenly without funds,” Valerie Beaudin, head of Consumer Residential Lending, told local media. Members may be eligible for the MEL if they have been in good standing with the credit union for at least six months and have proof of federal employment/furlough status. Loan applications can be completed online at www.vsecu.com or at any of VSECU’s nine branch locations.
In Michigan, Traverse Catholic Federal Credit Union has partnered with the local Bayside Market to help members of the Coast Guard and their families with free groceries. An account into which people can make donations to cover the costs of the groceries has been set up at the credit union.
In Riverdale, Utah,America First Credit Union is providing a special Furlough Assistance Loan. The personal loan of up to $4,000 will be made available to federal employees who have been furloughed due to the recent government shutdown. Additionally, America First, which has more than 988,000 members, is also offering members no-cost counseling services, loan extensions and numerous free and low-cost benefits. To be eligible for the Furlough Assistance Loan, individuals must be America First Credit Union members and have missed a paycheck due to the shutdown, the CU said. The Furlough Assistance Loan will be available one-time only and offers terms up to seven months, with one-month interest free. The loan has a zero percent interest rate for the first 30 days and then a 4.99% interest rate that begins to accrue on day 31.
Other Offers of Help
Radcliff, Ky.-based Fort Knox FCU, which is offering affected members a personal loan with no payments due for the first 90 days, or the option to withdraw up to $10,000 of certificate deposits early without penalty by visiting their local branch. FKFCU is also offering the opportunity to extend the payment due date on their current loans by 30, 60 or 90 days, depending on need as determined by the credit union, or applying for a new low-rate VISA credit card or instant cash line of credit to ease financial stress during the shutdown.
Keesler FCU in Biloxi, FCU., which is offering a payday advance for members who have federal payroll direct deposit established with the credit union.
In Maine, Northeast Credit Union has announced the availability of several special programs to assist federal workers, including deferments for up to three months on NECU consumer loans, a special low-rate on a 12-month Signature Loan with deferred payments, and continuation of direct deposit pay at the member’s request.
In Chantilly, Va., Justice Federal Credit Union is offering special assistance in the form of an unsecured, low interest rate loan and deferred payments to members of the Department of Justice and the Department of Homeland Security and other members furloughed as a result of a shutdown. Members with a minimum of six months of membership with Justice Federal may apply for a Special Assistance Loan up to member’s net pay, not to exceed $3,000 at an annual low rate of 2.94% for 24 months. The actual loan amount is based on the member’s net pay deposit, with direct deposit required. Members may opt to defer their first loan payment for up to 90 days. In addition, existing members in good standing with a Justice Federal consumer loan, or credit card may request to defer payments, and request assistance with a Justice Federal First Mortgage Loan.
In Massachusetts, Hanscom FCU, which serves Hanscom Air Force Base, said some of its members are eligible for a “LifeLine loan” during the time the government is shut down and paychecks are not being issued. In addition, Hanscom FCU said it will waive penalties for premature withdrawals on term share certificates and allow qualified members to skip consumer loan payments with no fee. Members whose paychecks are affected by a shutdown or a furlough are also able to apply for a 0% APR LifeLine loan with a 60-day term, up to 100% of one’s net monthly pay or $5,000, whichever is less. For those needing more than 60 days to repay, the loan will be converted into installment payments over a 12-month term at a low fixed rate of 8.49% APR.
The world’s largest credit union, Navy FCU, has announced a plan to cover direct deposit for eligible members during the government shutdown. Coverage for this loan begins if a shutdown extends into the next pay period and pay is interrupted. The credit union is offering assistance to Federal government employees and active duty members of the Coast Guard whose pay has been disrupted by the shutdown, and have an established direct deposit account. Navy Federal will also continue to accept registration for the program until three days after the scheduled pay day.
PLANO, Texas.—Member First Mortgage has launched its Western Division. The new division is led by Executive Vice President Linda Clampitt.
Clampitt and her management team bring more than 100 years of combined experience partnering with credit unions and assisting them in providing a superior mortgage experience for their members, the CUSO said.
“The Western Division will help expand the national footprint of Member First Mortgage by offering multiple partnership levels designed to utilize state of the art origination and digital marketing technology enabling credit unions to increase their market share, their income, and to help as many of their members as possible achieve the American Dream of home ownership,” the Grand Rapids, Mich.-based company stated.
“We are thrilled to join Member First Mortgage and bring new, innovative mortgage solutions to credit unions,” said Clampitt in a statement. “Member First Mortgage has an excellent culture committed to credit unions and the members they serve. We have an excellent opportunity to grow Member First into the premier provider for credit unions nationwide.” The CUSO said its leadership team and board are ready to bring “new and revolutionizing ideas to mortgage lending, allowing credit unions to be on the cutting-edge of home finance.
“We have exciting plans to make digital marketing and streamlined approval processes the new standard for credit unions,” said Clampitt. “The end result will be superior service to members with profitable results for credit unions.”
“It is the perfect time to add Linda and her team,” said President and CEO Jerry Reed. I sensed a shared synergy, drive, determination, strong work ethic the first day I met the Texas team.”
The company said it has been built on the credit union philosophy of People Helping People, and serves the home financing needs of credit union members as well as non-members.
Member First Mortgage is a full-service Fannie Mae, Freddie Mac and Ginnie Mae seller/servicer with an experienced staff offering expertise in every area of mortgage lending—from purchase, to refinance, conventional, jumbo, government and construction lending, the company noted.