NCUA Chairman Debbie Matz attended an Aug. 7 meeting in theWhite House's Roosevelt Room in which President Barack Obama announced that low-income designatedcredit union lending would be included in the administration'slatest drought-relief package.

The initiative, which includes a fast-track approval process for1,003 federal credit unions that qualify but haven't applied forlow-income status, could unlock between $250 million and $500million in new, near-term business lending, the NCUA said.Additionally, the NCUA said the measure has the potential to doublethe current number of low-income credit unions and increase theirmember business lending by nearly 75%.

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“With this initiative, we are cutting regulatory red tape andexpanding access to capital for small businesses, which shouldtranslate into job creation,” Matz said.

To qualify as a low-income credit union, a simple majority of50.1% of membership must live in low-income areas, based on 2010Census data. Benefits of LICU status include an exemption from the12.25% statutory cap on member business lending, eligibility forCommunity Development Revolving Loan Fund grants and low-interestloans, the ability to accept deposits from nonmembers andauthorization to obtain supplemental capital.

The NCUA sent eligible credit unions a notification letter Aug.7, informing them of the program. A simple affirmative reply to theopt-in offer will allow them to avoid the usual paperwork requiredof the approval process and begin utilizing LICU benefitsimmediately.

The $147 million Hope Credit Union of Jackson, Miss., has been an LICU since itwas chartered in 1994. CEO Bill Bynum said serving low-incomecommunities has its challenges, but the additional planning andattention to projections and risk management are worth theeffort.

According to financial performance reports posted online by theNCUA, Hope's numbers include a 5.31% delinquency rate and 0.17% ROAas of June 30. Bynum said low-income communities often lack thesafety net that members in wealthier communities enjoy, like theability to borrow money from family members. However, actual lossesare low–charge-offs typically run around 1% or less–thanks to goodrelationships with members. And Bynum said financials also reflectthat the credit union has been in growth mode, merging withstruggling credit unions that also serve distressed areas.

“We help [members] develop a plan, and use financial counselorsthat work with our members, and technical assistance partners thatwill sit down with them and help them think through theirchallenges. … We make sure we have the tools in place to supportour members,” he said.

While credit unions nationwide bemoan a lack of new loans, Hopereported 6.41% year-to-date loan growth as of June 30. About 40% of the credit union's loanportfolio is made up of business loans, with Hope generating between $30 million and$45 million in small business loans each year. Borrowers run thegamut, from rural hospitals and community health clinics tomanufacturers and retailers, Bynum said.

Bynum said Hope is also a Small Business Administration lenderand offers USDA guaranteed loans, because the programs help thecredit union mitigate risk so it can leverage more deposits intoloans. As of June 30, Hope's loan-to-share ratio was 97.5%. Bynumsaid not only is there plenty of loan demand in his underservedcommunities, demand is at the highest point he's seen in the creditunion's 18-year history.

Pam Owens, interim president/CEO of the National Federation ofCommunity Development Credit Unions, said her organization isexcited about the NCUA's opt-in program and hopes many eligiblecredit unions participate.

“So many credit unions have been serving low- andmoderate-income communities for years, but due to staff resourcesand time, they haven't pursued low-income designation,” she said.“Now they can be recognized for the work they do, and hopefullythis will open up other resources that are available to low incomecredit unions.”