NEW YORK — When the going gets tough, the tough don't retire. That is one of the lessons Clifford Rosenthal, CEO of the National Federation of Community Development Credit Unions has drawn from the current down economy.
Rosenthal, 63, had signaled his intention to step down from the federation in 2010 to work along other areas of interest, noting that by that time he would both turn 65 years old and celebrate his 35th year with the organization.
"It just seemed that would be a suitable year to move on from this work and into something new," Rosenthal said, "but it became clear that the current situation has changed significantly."
"The federation's board of directors discussed the economic upheaval we have undergone and looked to identify what the long-range impacts might be on the organization, and it became obvious to all of us that we are in uncharted waters," federation Chairman Eunice J. Rogers explained.
"Because of this and other factors, the board unanimously decided to invite Cliff to extend his time as CEO of the federation," she said.
The shifting situation has led to some community development credit unions starting to show losses on their balance sheets and decreased liquidity for the credit union system as a whole. Further, the federation noted the increased pressure on CDCUs was coming just at the time when the safety net for many of the people CDCUs serve is also shrinking.
As recently as early summer Rosenthal said the federation had not yet seen much fallout from the slowing economy at CDCUs, but added that even though the federation had not yet had time to conduct a through analysis it appeared that roughly 25% of its member credit union had begun to see losses from the economic downturn.
"Based on mid-year and third-quarter data that we have seen, it looks like most of our member credit unions have been seeing collateral damage," Rosenthal explained. "Auto loans, other sorts of loans have been the leading problem."
Rosenthal said that CDCUs have taken on relatively little damage from mortgage loans, in part because they don't offer many and because they generally did not offer subprime loans.
He also noted that the federation is definitely seeing a geographic pattern to the problems, with CDCUs in California and Florida showing up first. "It seems that CDCUs with members that include of lot of construction workers are among those being hit earliest," Rosenthal said.
Rosenthal said that he had gone so far as to announce his intent to step down at the federation's annual meeting this past summer and had started the transition process, which would now be put on hold for at least a year or maybe longer.
In response to the changing economic situation and following a course already set, Rosenthal said the federation is furthering its efforts to establish partnerships with between mainstream credit unions and CDCUs and between the federation and other organizations.
Among the partnerships the federation is building are with Goodwill International and NeighborWorks America. The Goodwill International link up will seek to match CDCUs in cities where Goodwill has stores with the goal of first serving the employees and volunteers at Goodwill and eventually offering credit union financial services to Goodwill customers who might be otherwise unbanked.
The federation will also continue its role as the sole organization coordinating and assisting credit unions, many of them CDCUs, that offer mortgage counseling, Rosenthal said. This is a program financed by the U.S. Department of Housing and Urban Development that the federation inherited from the National Credit Union Foundation.
CDCUs will also continue offering their first home emergency loan product (1st HELP) due in part to support from Treasury Department's community development financial institutions fund. The loans help credit unions refinance members out of high cost or predatory loans and avoid foreclosures. The federation will also continue its program of purchasing fixed-rate, nonconforming loans from CDCUs.
Finally, the federation is stepping up its efforts to help CDCUs get involved with municipalities that have become Cities for Financial Empowerment. The Cities for Financial Empowerment is a coalition of cities developing campaigns to fight predatory lending, promoting savings and encouraging use of the earned income tax credit.
"We have been involved with the coalition in San Francisco and New York and we are looking to the program to help raise CDCUs' public profile and get them even more involved in their communities," Rosenthal said.
Rosenthal stressed that during economic storms like these, it becomes even more important for credit unions to build partnerships like these. "I can't imagine anyone would have much success trying to weather this storm alone," he said.
–dmorrison@cutimes.com
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