An executive with the National Federation of Community Development Credit Unions has advised credit unions in Louisiana to keep lending, particularly in non-traditional mortgage loans.

Terri Fowlkes, director of Community Development Investments, told attendees at a special session of credit union executives attending the Louisiana Credit Union League annual meeting recently that such loans help both members and credit unions.

“With interest rates holding steady at rock-bottom levels, credit unions need to diversify their portfolios by continuing to make mortgages and increase their operating income,” Fowlkes said. “Responsible loans made to qualified members provide credit unions with a much better yield than they'll get from most other investment vehicles, and helps members build wealth through home ownership.”

Fowlkes said she recognized some of this lending can include non-traditional mortgages that are further complicated by not having a secondary market, but she pointed out the Federation maintains a mortgage center that purchases such loans.

The originating CU keeps the servicing, but the mortgage center purchases the asset and provides money to make more loans.

The center has purchased $10 million in loans since its launch in 2005, the National Federation said in a statement.

We conduct a rigorous due diligence on all the loans we purchase,” Fowlkes explained. “We have been growing our portfolio very slowly to ensure we buy performing assets from CDCUs. We know that there are hundreds, if not thousands of credit unions out there, who are holding paper they can't get rid of, simply because of the lack of secondary markets. The Federation wants to become the primary secondary market for credit unions serving low-income communities.”

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National Federation Executive Urges Louisiana CUs to Keep Lending

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