MIDDLETOWN, Pa. - Member business loans grew more than threetimes as much as the overall loan portfolio in 2004 and the pacedoesn't appear to be letting up. CU BizSource, which was originallyformed by the Pennsylvania Credit Union Association and acquired byCUNA Mutual Group's MEMBERS Development Co. LLC in July 2004, isamong those players helping the industry to facilitate those loans.The firm uses the secondary market for credit union member businessloans and has since expanded into underwriting consultation,document preparation, loan servicing and other areas that supportmember business services. It currently serves 25 credit unionclients nationwide and recently hired Philip McGoohan as itspresident/CEO. In March, NCUA gave approval to CUNA Mutual tolaunch the CU Systems Fund, an investment fund that will allow forthe purchase of business loans from credit unions and the sale ofshares in them to other interested credit unions. Credit UnionTimes recently talked with David Dunn, CU BizSource director ofoperations, on some of the hot button issues in member businesslending. Dunn created CU BizSource in 2001 and has worked incommercial banking in several capacities including in commerciallending and branch management. CU Times: What do you see as themost pressing issues for credit unions and member business lending?Dunn: The white elephant standing in the middle of the room wouldhave to be the 12.25% cap. Once a credit union has made thecommitment (to offer MBLs), the cap will become an issue in shortorder. It's just a question of when. That is an enormous concernregardless of the asset size of the credit union. There might alsobe a global issue - credit unions need to be able to develop theirown talent. Years ago, there was a preponderance of trainingprograms available to bank (staff). They really had the opportunityto learn commercial lending. But as banks have merged, they've doneaway with these programs. When these (lending experts) retire,there could be a good shortage of people to choose from. This maybe a problem for credit unions seeing as that many of them hireformer bankers. The time may be coming when you can't cherry-pick abanker, so how are we going to address this shortage? It may meancreating some type of university (to train credit union personnel).I should acknowledge that community bankers should also beconcerned. This concern is not unique to credit unions but to theentire financial services industry. CU Times: What is the biggestmistake that credit unions make when it comes to deciding to offerMBLs? Dunn: From my experience, it's related to the first(question). They recognize they need to get the right people onboard but some of them are not hitting the mark. Commercial lendingin the banking world doesn't fall on one person. There areunderwriters and business development people. Credit unions, intheir recognition that they need to get the right people,occasionally bring in the wrong sort of folks. Recognizing that,they find out that they have to get those folks help. One persondoes not a make a department. In finding the right persons, it candelay their entry into the market. CU Times: The Credit UnionRegulatory Improvements Act (CURIA) stands to raise the MBL capfrom 12.25% of assets to 20% and increase the MBL limit to $100,000from $50,000. What would these increases really mean for creditunions going forward? Dunn: It's a function of perspective. Thereare a number of credit unions that are prolific originators meaningthey underwrite a lot of loans and the cap becomes insufficient.Other large credit unions that made the investment in personnel andso forth, run up against the cap but because they're prolificoriginators, the (loan) demand is outstripping their means to makethe loans. For a lot of credit unions that are just getting startedover the next 12 to 18 months, it's going to take some time beforethe cap becomes an issue. CU Times: A recent editorial that ran inboth the Sacramento Business Journal and the Philadelphia BusinessJournal blasts credit unions' entry into member business lending,saying, in essence, they don't have the know-how to handle therisks that come along with offering such loans-what's your take?Dunn: Was it written by a banker? I haven't seen the editorial butit's important to recognize that there are are a number ofcommunity bankers that are working in the credit union industry. Inaddition to these folks, there a number of CUSOs that have theskills (to facilitate MBLs. There's nothing proprietary about theskills (bankers) bring. They bring their experience to creditunions and (credit unions) can apply lessons learned (to theirunique experience). That's what's happening now. I talk to creditunions every day and they're smart enough to know (the businesslending process). [email protected]

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