Immigrants Present Opportunities
Credit unions should embrace immigrants as members and not be dissuaded by negative political rhetoric associated with them, according to executives familiar with the demographic.
“If there were one thing I wish more credit unions knew about working with immigrants, it would be that doing so is not that scary or risky,” Winona Nava (pictured), president/CEO for the $137 million, 17,000-member Guadalupe Credit Union, said. “We serve immigrant members every day. We do so within regulations and without sharply higher losses from them than from any other members.”
NCUA data backed up her report. According to the agency, the Santa Fe, N.M.-based cooperative closed June 2015 with a net worth ratio of 10.64%, slightly below the peer average of 10.90%, but with a return on assets ratio of 1.22%, more than double the 0.57% reported by its peers.
In addition, although Guadalupe CU's ratio of delinquent loans to total loans stood slightly above its peers at 1.11% versus 0.83%, the credit union's loan to share ratio stood at 87.16%, compared to 69.85% for its peers. The credit union also closed Q2 2015 with an income of more than $825,000 and only $1,000 in its allowance for loan and lease losses.
Despite negative comments that are being made about immigrants during the current presidential primary season, Nava emphasized the cooperative finds its immigrant members are tremendously faithful about fulfilling their financial obligations and terrifically loyal to the institution, which has been loyal to them.
“They will be among the most loyal members a credit union will have,” she said, reporting that that loyalty was often multi-generational and stemmed from the children and grandchildren of the people who initially joined the cooperative.
Lower East Side People's Federal Credit Union Board Chair Deyanira Del Rio agreed that immigrants are loyal when treated fairly, and pointed out that serving the group falls right in line with credit unions’ missions.
She recounted a story from 2008 and 2009, when her cooperative helped an immigrant couple stay in their home after they had taken out a mortgage with some of the most predatory terms that New York foreclosure prevention attorneys had ever seen.
Del Rio explained that the couple, who were undocumented Mexicans, purchased a home in New York City in 2006. A broker steered them to a contract with a subprime lender that made them a loan for $380,000.
Using their combined family savings, the couple made a down payment of $50,000 and received a 2/28 adjustable rate mortgage, with interest-only payments for the first five years. The loan had an initial interest rate of 12.6%, but it was due to increase after two years. Over the life of the loan, the interest rate could have become as high as 18%. The couple made on-time payments for more than two years, paying more than $100,000 in interest – without reducing their principal by a single penny, Del Rio recounted.
The couple was vulnerable to this terrible financial trap because they believed they had no other options due to their undocumented immigration status, she said.
The cooperative stepped in by refinancing the couple's note using income tax returns from their family members, IRS-issued individual taxpayer identification numbers and other documents, Del Rio said, adding that the loan continues to perform today, and even though the family has faced hardships over the years.
“The father was injured on the job, and they experienced a significant decrease in income, for example,” she said. “They have stayed current on their mortgage and are extremely loyal and grateful to the credit union. This is not to romanticize or suggest that intervening in situations like these are easy – certainly helping someone get into a safe, affordable loan to begin with is far better than helping someone get out of a bad one. This couple was lucky; many others aren't.”
Miriam De Dios, president/CEO for the credit union consulting firm Coopera, stressed that due to their average age and financial needs, immigrants are great credit union member candidates.
“People need to remember that most of our immigrant populations are young,” De Dios pointed out. “Credit unions worry about the rising average age of credit union members, but here we have a population of people who need credit union services and who, in general, are younger and starting out in life.”
She added that many credit unions still cling to outdated fears and misunderstandings about the types of identification credit unions can accept from immigrants seeking membership. They can in fact use matricula consular cards, which Mexican immigrants can obtain from their consulates, along with passports and Individual Taxpayer Identification Numbers from the IRS, De Dios explained.
She also noted that today's immigrants are like their predecessors in that they view entrepreneurship and small business development as a path to economic success. In addition, contrary to popular misconceptions, immigrants are open to long-term relationships with financial institutions that they trust, which may include business loans and services.
Nava agreed and recounted how immigrant members at Guadalupe CU obtained loans to purchase mobile homes, paid them off quickly, and, using the mobile homes as vehicles to build capital, started small businesses.
Pablo DeFilippi, vice president for the National Federation of Community Development Credit Unions, argued that the benefits of welcoming immigrants boil down to financial inclusion.
“This is not just something that is at the core of what credit unions are all about,” he said. “Financial inclusion works. Financial inclusion pays. Look at Guadalupe Credit Union and at what similar credit unions across the country are doing. Credit unions face an outstanding opportunity by financially including immigrants.”