Regulator Outlines Problem Areas
ATLANTIC CITY, N.J. -- The NCUA is honing in on certain activities and figures for 2010, NCUA Associate Region II Director for Operations Herb Yolles told New Jersey credit unions last week.
First, he noted during the N.J. Credit Union League's Reality Check conference that 10% of mortgages are at least 30 days delinquent. And, Yolles pointed to a "shadow" foreclosure market highlighted in The Washington Post. According to the report, five to seven million foreclosed properties are backlogged in the system, which could take three years to unload, and another 11 million are underwater, which are the most likely to default. "Keep in mind," Yolles stated, "NCUA's paid to worry."
Second on his list of items for scrutiny was indirect lending. Credit unions do not realize the planning, review and risk management necessary to run a successful program, Yolles said. Constant vigilance is still a must in order to nip a problem in the bud.
Item No. 3 according to Yolles is concentration risk in any area of business.
Member business lending is a key issue of interest for credit unions right now as a new or burgeoning area of business. Be forewarned though: the NCUA also has it in its sites. Again, Yolles said, member business lending is far more complex than many credit union executives know going into it, so it can lead to trouble.
However, Yolles said his "biggest dark cloud" on the horizon now is interest rate risk. He explained that the question is not whether rates are going to rise but when, because the Federal Reserve is going to have to clamp down on inflation. Credit unions are not well-positioned, he said, because they are holding a lot of mortgages on the books, nationally equaling a 31% net long-term assets ratio.