ATLANTIC CITY, N.J. — NCUA Associate Region II Director for Operations Herb Yolles told New Jersey credit unions today that NCUA examiners are going to on the lookout for five particular problems.
First, he noted during the N.J. Credit Union League's Reality Check conference that 10% of mortgages are at least 30 days delinquent. And, Yolles pointed to a "shadow" foreclosure market highlighted in The Washington Post. According to the report, five to seven million properties are backlogged in the system, which could take three years to unload, and another 11 million are underwater, which are the most likely to default. At the same time, Yolles stated, "Keep in mind, NCUA's paid to worry."
Second on his list of items for scrutiny was indirect lending. Credit unions do not realize the planning, review and risk management necessary to run a successful program, Yolles said.
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Item No. 3: concentration risk in any area of business.
Member business lending is a key issue of interest for credit unions right now as a new or burgeoning area of business. However, it is also under strict oversight of the NCUA. Again, Yolles said, member business lending is far more complex than many credit union executive know.
Yolles said his "biggest dark cloud" though is interest rate risk. He explained that the question is not whether rates are going to rise but when, because the Federal Reserve is going to have to clamp down on inflation. Credit unions are not well positioned, he said, because they are holding a lot of their real estate on the books, nationally equaling a 31% net long-term assets ratio.
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