Mortgage-loaded CUs should push unsecured loans, argues Calif. Consultant

ALBUQUERQUE - When it comes to lending, credit unions are opting for the easy route these days - loading their portfolio with a heavy percentage of first mortgages and fewer unsecured credits. The end result threatens credit unions' market share. That's the opinion of loan consultant, Thomas A. Glatt, president of Counter Intelligence Associates, San Juan Capistrano, Calif. "The numbers tell the story," said Glatt speaking recently at the New Mexico Credit Union League's Annual Convention on "Lending in the New Millennium." To back up his premise, Glatt cited data showing first mortgages accounted for more than 30% of credit unions' loan mix in 1999, up from 21.2% five years ago. Meanwhile, unsecured loans at 13% of the portfolio in 1994, have dropped to 7.5% last year. While the yield is more attractive on the first mortgages, many CUs are fearful of higher charge-offs on the unsecured loans, but in exchange they're failing to cultivate long-term relationships with their members that will prove beneficial in the long run, maintained Glatt. Glatt also urged credit unions to move more quickly in the youth market to strengthen education programs and offer savings and credit type products to even very young children to attract them to CUs. It may not be long before "you will be glad to see a 12-year old on your board," he remarked. "I'm serious," he said to emphasize his point about the impact the very young will have in the area of inherited wealth. In discussing the emphasis directed to baby boomers, Glatt noted the surge in credit cards among college students - the latest statistics show that nearly three-quarters of college freshmen have credit cards. Given the heightened competition for loans, the California consultant warned credit union managers to avoid making "good ol' boy" loans as well as "friend of board" or "friend of president" loans. Another loan pitfall is the "Queen for a Day" loan, he said, made to members who present a sympathetic tearful story. In evaluating credits, CUs should be looking at "good loans made to the membership" rather than loans "to good members." Credit unions have their work cut out for them in trying to get members to use more of their services instead of banks, Glatt said. Data shows CU members use 2.5 services where the bank ratio is 4.5 and CUs spend $5.33 per member for marketing "but only 35-cents on member education." That's a statistic that is alarming and should be changed, Glatt said. -jamie7539@aol.com