First Atlantic FCU, W. Long Branch, N.J., has awarded 8 youths cash awards after its "Cool Kids Holiday Coloring Contest." The presentation was held at the main branch in Fort Monmouth. Winners included: Rhonda DuBois; Joseph Dugan; Evie Yawn; Timothy Herod; Lauren Crelin; Jennifer Cafiero; Stephen Czerwinski; and Michael McLean. FAFCU staffers presenting the awards to the youngsters were Linda Pearson and Irene Hoosack. RCU, Eau Claire, Wis., has announced that 17 staff members have completed state level educational units, a voluntary, self-study program offered by WCUL Three staff members received MERIT certificates for improving management and leadership skills. They are: Barb Hodges, Sandie Rubesch and Jan Walker. Fourteen staff members have received Staff Training & Recognition (STAR) Certificates. They are: Cathy Bourget, Martha Fremstad, Stephanie Jann, Rosanne Hoff, Betty Laskowski, Nancy McCauley, Christine Mickelson, Susan Meinen, Karleen Notham, Nancy Ruf, Janet Rusinko, Jan Walker, Sue Weber, and Cheryl Wirth. -lide@cutimes.com...

Capital Communications FCU, Albany, N.Y., has formed a partnership with Rensselaer County Coalition Against Abuse, headed by Rensselaer County District Attorney Kenneth Bruno, to work together against elder abuse and financial exploitation. As part of this effort, CCFCU has planned four training sessions for employees to raise awareness of the problem by teaching what signs to look for and where to report a case. CCFCU serves 38,000 members. Columbia CU, Vancouver, Wash., has held a grand opening and ribbon cutting for its new Hazel Dell branch at the SW corner of I-5 & 99th St. exit. This new office replaced an older Hazel Dell location, and includes an office for Columbia's investment subsidiary, Columbia Financial Network. Decatur Earthmover CU, Decatur, Ill., members received an interest rebate in January. Card holders received a 5% interest rebate on all finance charges paid in `99. In addition to the $600,000 in bonus dividends and interest rebates DECU paid on Dec. 31, another $26,000 was paid to Visa and MasterCard card holders. All bonus dividends/interest rebates were paid to members in good standing who had earned at least $60 in dividends last year, or who paid at least $60 in loan interest. About 10,000 of DECU's 18,000 members received an average payout of just under $61, ranging from the $3 minimum to over $2,000, officials said. Navy FCU, Everett, Wash., the world's largest FCU, has opened its 88th member service center, its third in Washington State, in Marysville. This center will serve military and civilian personnel assigned to Naval Station Everett. The manager of the new center is Susan Sapida. Two 24-hour no-surcharge ATMs also have opened in the area, one at NAVSTA Everett Citgo Mini Mart and the other at the Smokey Point Citgo Mini Mart. The grand opening and ribbon cutting on the new member service center was held in mid-February, said a Navy FCU spokeswoman. Pacific NW FCU, Portland, Ore., recently opened a new branch at the Bonneville Power Administration's Ross Complex in Vancouver, Wash....

RCU, Eau Claire, Wis., has raised more than $13,000 for the Indianhead Area Special Olympics. Three staff members from RCU's marketing department, Vicki Hoehn, Mike Rowan and Pam Teigen, raised $500 in pledges and then did what they had promised-went for a swim Feb. 6 in Half Moon Lake in Eau Claire. "It started out as a dare," explained Vicki Hoehn, senior vice president. "...But we were `freezin' for a reason,' so hopefully next year, we will raise even more money and encourage more people to jump with us!" Sierra Central CU, Yuba City, Calif., (Beale AF Base branch) staff have donated aprons to the Lone Tree School art program. They wore the bright yellow aprons as part of the CU's "Clean Sweep" signature loan promotion recently. After Tammy Phillips and Heather Roberts let Branch Manager Wendy Hall know that art students needed aprons, Hall arranged for the ones used by staff members to be donated. "These art classes wouldn't exist without volunteer support because of budget restraints, so giving them our aprons was the least we could do," Hall said....

AUSTIN, Texas - There's no such thing as getting a loan decision to a member too quickly. Whether a credit union is dealing with a consumer loan, auto or mortgage, speed and quality control are of utmost importance. An increasing number of credit unions in the country are delivering loan application decisions to their members in the fraction of the time it typically takes for off-line application approvals, and the whole process is transparent to the member. ARC Systems' flagship product LT2KT has been on the market since Feb. 1998 and as of Feb. 2000, the company says 5,800 loan application decisions have been made through the Internet-based automated credit evaluation tool, totaling $2.8 billion in loans. The most important element of LT2K is its ability to be customized to meet the financial's needs, says ARC Systems' President Edward Jones. "We don't try to establish a pattern," he explained. "The LT2K design engine can write specific instructions in code and build the application, depending on what the lender needs. It's very lender specific, depending on the lender's guidelines." Jones says the nicest feature of LT2K is that it's applicable to any process that involves a credit union decision. For example, more than 80 credit unions in the U.S. are currently receiving lending decisions to members' loan applications for consumer loans from LT2K software through the company's agreement with FIData, Inc. in Austin. Beyond lending products, the system can also support decision processing for insurance applications, tax verifications, and provide credit information to third parties for employment decisions. The credit union's loan application is accessible on their Web site. Members' completed applications are sent as an electronic file to ARC Systems, which in turn runs the application through the company's central server. In about 30 seconds, the applicant's credit history is sent to the three leading credit bureaus beginning with the one the credit union designates as their preferred credit bureau, a credit report is obtained, the loan is underwritten and a decision is returned to the member with pricing and stipulations. LT2K users pay a per application fee that varies based on the loan product. Jones says mortgage products typically involve a $35,000 one-time set up fee, a $7,500 per product matrix fee and a transaction fee. Personal loan fees vary from $10-$15 per transaction. Jones said ARC Systems technology is designed to compliment the lending operations of the lending institution. "The important thing is not to try to fit the borrower into any particular niche and to let the lender remain in control of their lending guidelines." -...

LONGWOOD, Fla. - Mark Pease, president and founder of Credit Union Real Estate Services Inc. knows a lot about credit union members and the mortgage process. Formerly the business development manager for central Florida with the Florida Credit Union League, Pease was responsible for organizing and putting on the league's business development workshops for first time homebuyers and annual homebuyers fairs. These days-and for the past three years-Pease is offering the same types of services year-round to the 34 credit unions in the central Florida chapter of the FCUL as a service from the business he operates out of the 115-year old historic Longwood Village Inn in central Florida. Pease covers everything from A to Z about buying a house in his three-hour workshop such as the in's and out's of the mortgage process, the different types of loans available and the mortgage contract. He encourages members to be pre-approved for a mortgage and even sends them home from the workshop with a pre-qualification package. As a licensed real estate appraiser and broker, Pease is well-versed with this information. Ruth O'Brien, assistant vice president of mortgage lending, Fairwinds FCU in Orlando says the exercise is invaluable for anyone thinking about purchasing a home, especially the first-time buyer. Last year, 76 Fairwinds FCU-members attended Pease's workshop and of those 14 closed mortgage loans with the credit union worth $1.3 million. "Normally, the first-time buyer goes to buy a home totally in the blind about what to expect," she said. "They're not familiar with the process and they don't know what their mortgage options are. Mark's workshops are a handholding exercise. He knows what steps the member needs to take in the entire home buying process. A lot of our members who weren't pre-approved were disappointed because they fell in love with a home only to later find they didn't qualify for a mortgage to buy it. Mark knows the value of the member being pre-approved for a mortgage." As of Jan. 31, Fairwinds had 4,000 first and second mortgage loans in its portfolio worth about $138.6 million. Kevin Freeman, manager of lending, Vista FCU, agrees with O'Brien that "Mark opens members' eyes to the mortgage process. He preaches pre-qualification." Chartered out of Burbank, Calif. but with most of its branches in Central Florida, the $194-million CU's mortgage loan portfolio is over $60 million. "Most first-time home buyers are clueless about the home buying and mortgage processes," said Freeman. "They think all it involves is buying a home and you're done. The workshops are geared to the member who has never purchased a home, but they're also valuable to the veteran home buyer as a refresher course." -...

NCUA incidental powers rule for FCUs one possible way to shore up federal CU charter.............................................Page 22...

Orangeburg, N.Y. - Alliance Funding, which has been providing banks and other financial service institutions with a range of subprime mortgage lending products for their customers since 1985, has recently added credit unions to its list of partners. According to Kathy Lipps, assistant vice president, director of affinity relationships, Alliance saw the need for credit unions to offer a wider range of mortgage products to members. A primary focus in the Alliance/credit union relationship is to educate staff and administrators that it is better to provide mortgage loans to members in the fallout borrower category, those with less-than-perfect credit, than to turn people away. "Credit unions may question the subprime rates offered which are higher than the standard secondary market pricing, but they don't realize that by saying `no' to a member, that person is still going to try and get a loan someplace else. They may go down the street to a local broker who may be unscrupulous and charge even more for a loan. To such brokers, these are just one-time transactions, so they want to make as much money as possible," said Lipps. "Saying no to a member can be detrimental to the credit union/member relationship," Lipps explained. "If the credit union were to help educate the member and say, `Because of your situation, this is why you have to take out this type of loan,' it can also tell the member that if his or her credit record is kept clean for up to two-to-three years, it can help refinance that person into a better product." To be labeled a fallout borrower, or to be a borrower with less-than-perfect credit, is usually a point of embarrassment or humiliation. Lipps said that each person's situation is different, but the subprime borrower can be, for example, a single parent with credit concerns, a businessperson with a recent bankruptcy, or a self-employed person who is unable to verify income. The people in this category, based on secondary market guidelines, do not fit into the "perfect box" of the secondary market set by conventional lenders such as Freddie Mac and Fannie Mae. Alliance offers a broad range of mortgage products. Some highlights of its A through D loan programs (from $10,000 to $1 million) include: 90% LTV (loan-to-value), first and second mortgages; 85% LTV, no income verification first and second mortgages; no PMI (primary mortgage insurance), no 4506 or prepays; no asset verification or bank statements; no credit scoring; no reserves or escrow; and no limit on cash-out. "As far as amortization-type of products, we offer 15, 30 and 15/30 balloon mortgages and two-year breather and three-year adjustable mortgages," said Lipps. The types of properties Alliance will fund include: single family, one- to four-unit homes; low-rise and high rise condominiums; and single- and double-wide manufactured housing. "It's pretty much everything that is out there," said Lipps. In partnering with Alliance Funding, credit unions have the opportunity to earn fee income through a broker or correspondent lender relationship. As a broker, the credit union originates and processes the loan, but the loan would close under the Alliance name and with Alliance funds. The credit union sets up its own type of fee structure and collects points from the member at closing. As a correspondent, the credit union closes the loan in its name and with its funds. It can earn additional income through premium pricing. ("We don't see that happen to often," said Lipps as an aside.) The loan is then delivered to Alliance. If Alliance buys it at a higher rate than the established pricing, the credit union would earn points under that, plus what it would collect from the member at closing. Currently, six credit unions are providing subprime mortgage products with Alliance. Some of them include: Mid-Hudson Valley FCU, New York; CTCE-FCU, Pennsylvania; and Southern Utah Credit Union. Currently, there is an agreement pending with the board of American Heritage FCU, Pennsylvania. Alliance's total loan portfolio, including banks and credit unions, is $4.5 billion. Alliance's relationship with institutions such as J.P Morgan and Merrill Lynch has helped it securitize loans. It has also been securitizing loans since 1990 through FGIC (Financial Guarantee Insurance Company). Between all credit unions and banks, Lipps said the entire subprime market is valued as $10 billion. The company is not only forging relationships with banks and credit unions. According to Lipps, Alliance is establishing relationships with credit union service providers and CUSOs (Credit Union Service Organizations) which can offer mortgage and insurance-type products. One example of an outside relationship is the one Alliance has created with SWBC Mortgage, a company owned by South West Business Corp, San Antonio, Texas, a provider of insurance products to credit unions. "SWBC Mortgage processes quite a few loans to credit unions," said Lipps. "They say they can offer loans all across the board. When they need a subprime product, they come to us." Alliance Funding is a division of Illinois-based Superior Bank, FSB, which has over a billion dollars in assets. -Birritteri@hotmail.com...

MADISON, Wis. and MCLEAN, Va. - One of perhaps the best kept secrets is no longer a secret. It may be a little known fact to only a few in the industry that CUNA Mutual Mortgage and Freddie Mac have been working together since 1998 and more than 316 credit unions are already using Freddie Mac's Loan ProspectorT mortgage evaluation and processing tools. That relationship has now been further sealed with a new technology alliance that CUNA Mutual Mortgage President/CEO Stephen Renock is hailing as being "a tool that will revolutionize the way members' mortgage loans are originated and technically change the way members acquire and finance their home loans. Details of the announcement, which was made during CUNA's Governmental Affairs Conference were still being finalized at press time. What is known so far is that members of credit unions using CUNA Mutual Mortgage to originate their mortgage loans will be able to link up to Freddie Mac and use Loan Prospector to complete and submit a streamlined, on-line loan application, receive a customized loan pre-approval, and lock in their rate. Members will also be able to access real-time status information about their loans from their credit union's Web site and get real-time answers to questions about mortgage loans including commonly used acronyms and terms. "Consumers want to be in control of the mortgage lending process," said Jim Taylor, vice president, business development for Freddie Mac. "A lot of consumers, especially first time home buyers, don't understand the jargons and terms associated with mortgage lending and they're frequently embarrassed to ask someone.They want convenience and reliability and they don't want to have to deal with someone else in that process." More important, said Taylor, the mortgage application will only ask the applicant for information that's necessary, have "auto populate documentation" features and unlike most online mortgage lenders' Web sites, not require the applicant to complete Form 65 or 1003. So, for example, if an applicant answers that they've lived at a particular address for five years, they won't be prompted to provide their previous address. CUNA Mutual Mortgage estimates the new streamlined mortgage lending process will save homebuying members up to $1,500 in mortgage origination fees. In most mortgage applications, about 1% of the originating fee typically goes to the lender, explained Stephen Renock IV, president/CEO, CUNA Mutual Mortgage. Using the CUNA Mutual Mortgage/Freddie Mac product, this amount is reduced to a fixed fee since there is no commission paid to a sales person. In addition, he said, there is virtually no property appraisal cost to the member, and, the closing fee and underwriting fee are eliminated. Once the mortgage is approved, the actual loan closing would have to be completed in person, because of state regulations, but beyond that the process is all done online. "For credit unions that are fighting with other financials everyday to be consumers' primary financial institution, this is a great tool to solidify that PFI relationship," said Renock. Besides originating the mortgage loan, CUNA Mutual Mortgage will also fund the loan. After closing, CUNA Mutual Mortgage will have the option of selling the loan to Freddie Mac if it's a conventional loan, or back to the member's credit union to keep on their portfolio either in part of in full. Other types of loans, such as jumbo loans, can be sold to non-conforming investors. Either way, CUNA Mutual Mortgage will be responsible for servicing the loan. The company is currently looking for credit unions to pilot the new service and is hoping to have the product underway by the end of March or early April. Renock said CUNA Mutual Mortgage and Freddie Mac will be looking for a mix of credit unions, including those not involved in mortgage lending, those involved but are interested in rethinking their strategy, and tech-savvy credit unions who are typically early adapters of new technology-based programs. Asked what effect Freddie Mac's reputation of facilitating loans to the financially underserved will have on the success of the new alliance, Renock said, "This alliance with Freddie Mac is a tremendous way for credit unions to reach out to the underserved. These types of loans are usually not easy for consumers of low economic means to originate because of their credit backgrounds, so it's a way for credit unions to accommodate these consumers and help open doors for them to homeownership." -...

CUNA castigates NCUA Chairman D'Amours for remarks at GAC address..............................................Page 4...

ATLANTA-The Federal Home Loan Bank of Atlanta, one of 12 district banks in the Federal Home Loan Bank System that provides low-cost financing and other banking services to financial institutions, has announced that five credit unions have become members and stockholders. These include: National Institutes of Health Federal Credit Union, Rockville, Md.; GTE Federal Credit Union, Tampa; Postal & Professional Credit Union, Sunrise, Fla.; University Federal Credit Union; and Sloss Federal Credit Union, both in Birmingham, Ala. After Congress several years ago expanded membership eligibility in the Federal Home Loan Bank System (established in 1932 to offer credit at competitive rates to support economical home financing) to include credit unions, thrifts and commercial banks, credit unions have joined to take advantage of these services, said spokeswoman Asia Grimes. The Federal Home Loan Bank System of Atlanta is a $43 billion stockholder-owned reserve credit bank that provides low-cost financing and other banking services to more than 900 financial institutions that offer housing financing to consumers in Alabama, Florida, Georgia, Maryland, Virginia, District of Columbia and North and South Carolina....

NEW YORK-The chief operating officer of DoubleClick, Kevin O'Connor issued a statement recently concerning the Internet advertiser's plan to trace Web surfer's activities from site to site and combine that information into idenitifiable profiles for later target marketing....

NEW YORK - When it comes to consumer satisfaction with their financial institution, credit unions are king....

WASHINGTON-CUNA Mutual Group and CUNA Lending Council officials have announced newly formulated guidelines for credit unions competing for the new Credit Union Excellence in Lending Award (CU Times, Dec. 22), and invited participants to visit the www.lendingchallenge.org on the Web for "best practices" in lending articles. Officials explained to CUNA GAC participants recently that CU system lending professionals and a judging council will look at award entries each month. Entries that meet award criteria will receive a recognition certificate and become eligible for consideration for an Excellence in Lending Award. All CUs in the United States may apply and may nominate themselves by submitting an application. CUNA Mutual Group, CUNA Lending Council, Filene Research Institute and the Consumer Federation of America officials will judge entries according to certain financial ratios weighted so a score may be generated. Consumer ratios such as loan-to-share, delinquent loans to total loans, and net charge-offs to average loans will be used. "The scoring method was developed with the assistance of several lending vice presidents from successful credit unions across the country," explained E.C. Williams, CUNA Lending Council chairman and senior vice president of consumer lending/branch operations at MacDill Federal Credit Union. For information or applications, call (800) 356-2644, ext. 5312....

TUKWILA, Wash. - At press time, the strike of approximately 22,000 Boeing employees was still on....

WASHINGTON-CUNA Strategic Services Inc. (CSSI), a nationwide provider of financial products and services to credit unions focusing on e-commerce and strategic alliances, has announced that its shareholders have elected directors to its Board. They include: Chairwoman Nancy Pierce, president/CEO of Mazuma Credit Union; Vice Chairman Guy Hood, president/CEO of Florida CU League; Secretary Juri Valdov, president/CEO of Northwest Federal Credit Union; Treasurer Richard Ensweiler, president/CEO of Texas CU League; Richard Ghysels, president/CEO of First Financial Credit Union; Gene Poitras, president/CEO of Oregon CU League; and Watt Prichard, president/CEO of San Antonio Telephone Federal Credit Union. A CSSI spokesman said that the Board will work "to establish the vision, mission and strategic direction of the organization, with input from the CUNA CSSI Study Subcommittee and the American Association of CU Leagues (AACUL) Business Activity Committee." CSSI is owned by state CU leagues and CUNA....

VANCOUVER, B.C. - British Columbia's Financial Institutions Commission-the government's watchdog agency for financial institutions-placed Khalsa Credit Union under administration March 6, alleging conflicts and questionable practices by the credit union's president....

SAN FRANCISCO - A group of Internet real estate lenders and mortgage lending companies have formed The Online Real Estate Association to improve their mutual performance, address regulatory issues and improve service to consumers. The new association, was announced at the recently held Real Estate Connect 2000 Summit here. The new group includes Microsoft, Intuit's Quicken Loans, HomeGain, ImproveNet, Inman News Features and John L. Scott Real Estate. The group is expected to work with government agencies to promote the automation of online real estate transactions, as well as work together in adopting new technologies....

WASHINGTON - New and existing home sales set a record in 1999, according to a report recently released by the Department of Housing and Urban Development (HUD). The report, "U.S. Housing Marketing Conditions 4th Quarter Report", showed that for the year, new home sales were up 2% from 1998; existing home sales increased 5% from 1998; housing permits were the highest they've been since 1986; and housing starts were also at their highest level since 1986. In addition, the home ownership rate stood at 66.8%, up from 66.3% in 1998. HUD credits the strong economy "created by Clinton Administration policies" for driving up home sales and home ownership. There were 8.7 million more homeowners at the end of 1999 than when Clinton took office in 1993....

WASHINGTON - The seven-member business lending task force of the American Association of Credit Union Leagues (AACUL) is planning to hold its first meeting during the week of March 6 to discuss the best approach to identify opportunities and develop business lending support services for credit union leagues. Among the models the task force is considering is the Georgia Credit Union League/National Cooperative Bank model. Started last year and patterned after mortgage programs, it gives credit unions three-tiered levels they can participate in for making business loans: the credit union can refer members to NCB; the CU can collect information on the loan from the member, take the application and then pass the material on to NCB; the CU is involved in the closing of the loan. In all three options, NCN owns the loan. The CU has the option of buying back a portion of the loan and putting it on their loan portfolio. Ralph Jones of the GCUL and a member of the task force said the business loan model is "a way for a credit union without business lending expertise, to gain experience through a third party."...

WEST PATERSON, N.J. - HLR FCU has become the newest credit union to take a minority stake in CUMANet, a credit union-owned real estate organization....

ANCHORAGE, Alaska - Alaska USA Mortgage Inc., formerly known as Alaska Home Mortgage Inc., a wholly owned subsidiary of Alaska USA FCU, has introduced its new Web site-www.alaskausamortgage.com-which company officials say is designed for real estate professionals and homebuyers, as well as consumers looking to refinance their existing home. The new site provides a variety of resources and consumer tools, including mortgage information, a glossary of terms, calculators to estimate monthly payments and a rent-v.-buy analysis. There are also links to tools such as a booklet for first-time homebuyers that explains the mortgage process and tips for buying a first home. The company was renamed in early February to more accurately reflect the relationship between Alaska USA Mortgage Inc. and the credit union, officials said....

WASHINGTON - Speaking to the Neighborhood Reinvestment Training Institute in Atlanta, Office of Thrift Supervision Director Ellen Seidman put the banking industry on notice to expect to see regulations addressing predatory lending published in the form of an "Advance Notice of Proposed Rulemaking" (ANPR) by the end of March. Recognizing those lenders who have been involved in identifying and fighting predatory lending culprits, Seidman said "Federal and state regulators, as well as law enforcement agencies, need to become more aggressive with lenders engaged in unlawful predatory lending practices - from prohibitions against fraud to the requirements of fair lending." She cited the legislative initiatives states such as North Carolina, Massachusetts, New York, Illinois and Missouri have taken to address the issue, but emphasized that "enforcement is only a piece of the strategy." "The consumers who fall victim to predatory practices often have real credit and other financial needs," Seidman said. "Many are motivated to improve their homes, but place their trust in disreputable contractors...Bringing reputable lenders into the neighborhood is where the real action is." Seidman said no specifics on the proposed regulations were available yet, but she said the ANPR could concern the practice of financing certain fees, such as the single-premium credit insurance on mortgage loans. -...

It is always unfortunate when a well-informed public official fails to use the bully pulpit to shape opinion in a positive way. That was the case in the Credit Union Times (March 1, 2000) article "Privacy for sale" by Congressman Edward Markey (D-MA), a leading advocate of even more restrictive financial privacy laws....

As the head of Government Relations with NASCUS, I think Mike Welch misses the mark in his "Time to move on from `modest means' survey fuss" column, February 9....

While the fundamentals of business lending are similar to those for consumer lending, the skills, documentation, risks and payoffs are dramatically different. Many credit unions are expanding their business lending portfolios or are introducing business loans for the first time. The reasons are many. Some credit unions offer business loans to meet changing member demand. Other credit unions are looking to business lending as fertile ground to grow loans when consumer loan demand is slowing. Commercial lending is a trickier sea to navigate than consumer lending. For instance, the average consumer borrower can verify income with pay stubs. Typically, pay stubs represent a relatively stable source of income, though it may fluctuate depending on overtime, commissions, etc. Business income can fluctuate dramatically from season to season and from year to year. Further, while you rarely update a member's wage information after a consumer loan is made, a business lender needs to track a business all through the loan term to ensure that the borrower remains financially stable and maintains key ratios within agreed-upon ranges. Also, the loan amounts are usually larger than consumer loans, therefore the risk of loss looms greater. Lending to the self-employed can mean two different things. One of them most credit unions already do, the other, only a few, but growing number, get involved with. The first is making consumer loans to self-employed members. The second is making commercial loans to self-employed members. A consumer loan is for such things as a personal car or home mortgage. This is not a commercial loan, even though the income may come from self-employment, as it does not fit the NCUA definition of commercial lending. Even though it is not a commercial loan, some of the process of commercial lending is used; namely, reviewing, analyzing, and cashflowing the borrower's personal income tax return. Analyzing a tax return is a special skill, and few credit union lenders truly understand tax returns. Many simply take the Adjusted Gross Income (AGI) from the borrower's tax return and divide by twelve. By coincidence, this method is right sometimes. But even a broken clock is right twice a day. A tax return can contain hidden expenses, or include incomes that are not true cash flow. Fortunately, there are software products on the market to take the mystery out of this process such as our Lenders Tax Analyzer program or TaxFlow from Cotton, Parker, Johnson and Co. A commercial loan is one in which both: 1) the proceeds from the loan are used for business purposes, and 2) income to repay the loan is derived from business assets. When processing commercial loans, the regulations, though always cumbersome, are actually fewer than for consumer loans. One major regulation that doesn't cover commercial loans is Reg. Z, Truth-in-Lending. But that doesn't mean commercial lending is easier, it isn't. Commercial lending is much more difficult than consumer lending. Commercial lending requires a lender to understand financial statements, financial trend analysis, financial ratios and what they mean for the specific industry your borrower is in. Oddly, comparing a business to its industry peers is only marginally useful. As a credit union you understand that, as you are often compared to your peer credit unions and no two credit unions are alike. That is why trend analysis is so critical. It is most important to compare a business against itself over time and see if it is stable, improving or declining. Every lender knows the 5 C's of consumer lending. Commercial lending still comes down to the same 5 C's. One banking author likes instead to use the 4 P's of commercial lending. These are Purpose, Payment, Protection and People. Purpose means understanding what the proceeds will be used for, and does it really make sense. If the loan is to provide `working capital', but the business only needs working capital because the business spends more than it earns, that is not a good purpose. Payment is just the C of Capacity but, as usual, it is more complex with a business. The cash generated to repay the debt must be adequate, it must be available at the appropriate time, and it must last at least as long as the term of the loan. Protection is the secondary source of repayment. This is a guarantor or collateral that can repay the loan if the primary source of repayment fails. But the most important of all the P's is the People. As one veteran commercial lender once told me, "businesses don't pay you back, people do. So know the people". It seems that moving into commercial lending is a logical step for many credit unions. However, it is an area that requires different skills, knowledge and experience than consumer lending. It is important to plan and staff properly for commercial lending. With proper preparation and follow through, your credit union could become even more important to your members and more profitable....

Things are happening so fast in the world of credit unions that it is easy to forget that there is usually another side to most stories involving CUs. Here's one example: NCUA is being taken to task for increasing its staff and annual operating budget at a time when the number of credit unions and more specifically, the number of problem credit unions, is steadily declining. Particularly at issue are 34 examiners who the credit union trades are claiming were brought on board for the Y2K crisis that didn't happen. The point is being made that they should no longer be needed. Eliminating them and in general holding the line on staff additions would also have a positive impact on the regulator's operating budget, according to critics. The other side of the story: While the NCUA budget debate rages on, most state and national credit union organizations that serve that same declining credit union base, have been adding many new staff and implementing substantial operating budget increases. In some cases, the number of staff is double and the added budget dollars considerably over what they were when there were twice as many credit unions requiring association services. In fairness, credit union trade groups and professional organizations are offering a greater variety of programs and services to a much more demanding and sophisticated clientele. Thus, while there are far fewer credit unions to serve, those that are still around have shown a need for more bang for their buck. Just one of many examples: the banking lobby has become so intense that the size and expertise once available at the trade group level would be hopelessly outgunned in facing the challenges and workloads of today. Then there's the new technology needs. However, couldn't the same thing be said on behalf of NCUA's claim that more staff and program dollars are needed? In other words, if credit unions have progressed to the point where they need more outside staff and budget support, could it also be concluded that the same rule of thumb applies to the regulation of the safety and soundness of credit unions? Taking this approach a step further, credit unions have also boosted staffing totals and operating budgets considerably in recent years. Admittedly, there is an important distinction to be made between CUs and the groups that they fund to serve them and regulate them. The number of members served by credit unions has grown at a faster rate than the staff at credit unions. So have the number and complexity of product and services offerings available to those members. The other side of this story then appears to be that every entity seeking more staff and credit union operating dollars needs to make the best possible case for themselves, or they will end up playing strictly defense such as NCUA is now doing. Here's another example of a story with another side: The Wall Street Journal reported recently that major banking institutions finished the millennium with great fourth quarter earnings. Among reasons given for the buckets of black ink was a healthy increase in fee income, as much as 31% for one large bank. Chase Manhattan Bank, number two in the country, saw fourth quarter earnings increase 46% or $1.68 billion. While sitting in their counting houses counting all the money, banking industry executives and lobbyists at both the national and state level, still found time to continue to whine about the "unfair competition" from credit unions because of the lack of a "level playing field." Could one assume that without credit unions allegedly eating into their profits that the banks could have really made some big money? The other side of the story is that despite unrelenting attacks on credit unions, the banking industry is robust and flush showing little actual damage by credit unions. Here's another example: Prompt Corrective Action (PCA) is a topic much on the minds of credit union CEOs and industry lobbyists and regulators these days. The banking industry is also keeping close tabs on developments to make certain that H.R. 1151 imposed handcuffs are fastened securely enough so that credit unions can be further held in check as competitors. Despite being such a hot topic, there is growing evidence that those who set policy for credit unions may be far from up to speed on this issue. One of many illustrations: At a recent credit union conference with a high percentage of volunteers in the audience, I asked the group point blank how many were familiar with the PCA issue. Only a smattering of hands besides those of credit union CEOs and management staff went up. The temptation is to blame volunteers for not keeping abreast of crucial issues that have the potential to cause major problems for credit unions. The other side of the story is that many credit unions are not doing a good job close to home of educating their own directors. Instead, they send them off to a conference and expect that to do the job for them. It obviously hasn't turned out that way. And a final example: A review of the last 10 years of NCUA call report data shows clearly that credit unions as an industry are enjoying substantial growth. In 1989 total assets were approaching $200 billion. They have more than doubled and are now approaching $450 billion. The other side of the story is that the real growth is being fueled by fewer and fewer credit unions. The 80/20 theory (20% of the credit unions have 80% of the assets and members) is becoming the 85/15 theory. The top 250 credit unions have gradually captured a greater percentage of total industry assets. They now represent over 42% of the total. There are many more examples. Be skeptical and ask questions. There almost always is another side to the story. Comments? Call 1-800-345-9936, Ext. 15, or Fax 561-683-8514, or E-mail mwelch@cutimes.com....

Consumers of all ages aren't keen on their financial institution selling their personal or financial information to marketers. As the below chart shows, roughly eight out of 10 consumers with household income of $25,000 or more say it is unacceptable for their information to be sold for marketing purposes....

First Atlantic FCU, W. Long Branch, N.J., has made the following appointments: E. John Culp II, president/CEO; Alex Binder, vice president of member services; and Leonard Boos, chief financial officer. Hudson Valley FCU, Poughkeepsie, N.Y., has made the following appointments: Sandy Ludlum, vice president of operations; Lisa Morris, vice president of marketing; Alex Neil, vice president of e-business; Tony Rohrmeier, vice president of information technology/network services; and Amy Russo, vice president of human resources. Steel Works Community FCU, Weirton, W. Va., has elected the following to its Board: John R. Thayer, chairman; Delbert Horstemeyer, 1st vice chairman; William Teaff, 2nd vice chairman; and Edward L. Kennedy, treasurer....

BISYS, Little Falls, N.J., a third party administrator of domestic and offshore mutual funds, has made the following appointments: Mark Dillon, executive vice president of client services; and Joe Jimenez, senior vice president of transfer agency services. Card Capture Services Inc., Portland, Ore., an independent provider of ATMs in north America, has named Matthew Buhler vice president of distribution. C. Myers Corp., Phoenix, a provider of consultant assistance to CUs on managing balance sheet risks and long-term capital at risk, has named Sally Myers CEO. Concentrex, Portland, Ore., a provider of technology-powered solutions for financial services delivery to more than 5,000 clients nationwide, has named Lincoln R. Baker national sales director. CUNA's Center for Professional Development, Madison, Wis., has named Amy Peterson director of sales & marketing. Datacard Group, Minnetonka, Minn., which specializes in innovative plastic card personalization and identity management solutions, has made the following appointments: Elaine Bliss, general manager of Credentia; Paul Schroeder, general manager of Datacard Worldwide; and Roger Sigler, leader of Datacard Group's international sales & distribution. RSM McGladrey Inc., Bloomington, Minn., an accounting, tax and consulting firm serving mid-sized companies in the U.S., has made the following appointments: Matt Schriner, managing director; and Cristin Burnett, senior consultant/supervisor. Southwest Business Corp., San Antonio, a provider of a diversified menu of investment, mortgage and insurance services to CUs since 1976, has announced that Chairman Charles Amato has been named chairman of the Greater San Antonio Chamber of Commerce....

EDS Credit Union, Plano, TX, has made the following appointments: Shirley Cohen, senior vice president of lending; Phil Craver, senior vice president, CFO; Tom Condos, chief technology officer; Kevin Ericson, senior vice president of branch administration and member services; and Tim McCoy, vice president of marketing/business development. RCU, Eau Claire, Wis., has named Trish Knops CU fleet department representative in the Auto Resource Center....

Columbia CU, Vancouver, Wash., has made the following appointments: Dixie Shaw, senior vice president of marketing; Tom Griffith, senior vice president/chief financial officer; Dave Hurt, general services manager; Melissa Perseghetti, assistant vice president of consumer lending. Sierra Central CU, Yuba City, Calif., has named Pamela Powers vice president of branch administration. Multco CU, Portland, Ore., has named Karen A. Johnson chief executive officer. Washington CU League, Federal Way, Wash., has named Adam S. Bashaw director of public relations, and Skott Pope director of education and training....

First Atlantic FCU, W. Long Branch, N.J., has awarded 8 youths cash awards after its "Cool Kids Holiday Coloring Contest." The presentation was held at the main branch in Fort Monmouth. Winners included: Rhonda DuBois; Joseph Dugan; Evie Yawn; Timothy Herod; Lauren Crelin; Jennifer Cafiero; Stephen Czerwinski; and Michael McLean. FAFCU staffers presenting the awards to the youngsters were Linda Pearson and Irene Hoosack. RCU, Eau Claire, Wis., has announced that 17 staff members have completed state level educational units, a voluntary, self-study program offered by WCUL Three staff members received MERIT certificates for improving management and leadership skills. They are: Barb Hodges, Sandie Rubesch and Jan Walker. Fourteen staff members have received Staff Training & Recognition (STAR) Certificates. They are: Cathy Bourget, Martha Fremstad, Stephanie Jann, Rosanne Hoff, Betty Laskowski, Nancy McCauley, Christine Mickelson, Susan Meinen, Karleen Notham, Nancy Ruf, Janet Rusinko, Jan Walker, Sue Weber, and Cheryl Wirth. -lide@cutimes.com...

Capital Communications FCU, Albany, N.Y., has formed a partnership with Rensselaer County Coalition Against Abuse, headed by Rensselaer County District Attorney Kenneth Bruno, to work together against elder abuse and financial exploitation. As part of this effort, CCFCU has planned four training sessions for employees to raise awareness of the problem by teaching what signs to look for and where to report a case. CCFCU serves 38,000 members. Columbia CU, Vancouver, Wash., has held a grand opening and ribbon cutting for its new Hazel Dell branch at the SW corner of I-5 & 99th St. exit. This new office replaced an older Hazel Dell location, and includes an office for Columbia's investment subsidiary, Columbia Financial Network. Decatur Earthmover CU, Decatur, Ill., members received an interest rebate in January. Card holders received a 5% interest rebate on all finance charges paid in `99. In addition to the $600,000 in bonus dividends and interest rebates DECU paid on Dec. 31, another $26,000 was paid to Visa and MasterCard card holders. All bonus dividends/interest rebates were paid to members in good standing who had earned at least $60 in dividends last year, or who paid at least $60 in loan interest. About 10,000 of DECU's 18,000 members received an average payout of just under $61, ranging from the $3 minimum to over $2,000, officials said. Navy FCU, Everett, Wash., the world's largest FCU, has opened its 88th member service center, its third in Washington State, in Marysville. This center will serve military and civilian personnel assigned to Naval Station Everett. The manager of the new center is Susan Sapida. Two 24-hour no-surcharge ATMs also have opened in the area, one at NAVSTA Everett Citgo Mini Mart and the other at the Smokey Point Citgo Mini Mart. The grand opening and ribbon cutting on the new member service center was held in mid-February, said a Navy FCU spokeswoman. Pacific NW FCU, Portland, Ore., recently opened a new branch at the Bonneville Power Administration's Ross Complex in Vancouver, Wash....

RCU, Eau Claire, Wis., has raised more than $13,000 for the Indianhead Area Special Olympics. Three staff members from RCU's marketing department, Vicki Hoehn, Mike Rowan and Pam Teigen, raised $500 in pledges and then did what they had promised-went for a swim Feb. 6 in Half Moon Lake in Eau Claire. "It started out as a dare," explained Vicki Hoehn, senior vice president. "...But we were `freezin' for a reason,' so hopefully next year, we will raise even more money and encourage more people to jump with us!" Sierra Central CU, Yuba City, Calif., (Beale AF Base branch) staff have donated aprons to the Lone Tree School art program. They wore the bright yellow aprons as part of the CU's "Clean Sweep" signature loan promotion recently. After Tammy Phillips and Heather Roberts let Branch Manager Wendy Hall know that art students needed aprons, Hall arranged for the ones used by staff members to be donated. "These art classes wouldn't exist without volunteer support because of budget restraints, so giving them our aprons was the least we could do," Hall said....