Posts filed under ‘General’

If Demographics Is Destiny, Is Your Credit Union Dead?

Image result for millennialsI shouldn’t start my first day of the work week with one of those credit unions are doomed blogs but I can’t resist. The truth is radical demographic shifts are taking place and like any other business, if you’re not adjusting to these trends then you’re destined to fail. In the immortal words of Ted Turner, “You can either leave, follow, or get out of the way.” After all, whoever said demographics is destiny was spot on.

What has me thinking so negatively this morning is this great article in the Wall Street Journal reporting that the biggest single age cohort is 26 year olds who number 4.8 million. People ages 25 and 27 also follow close behind. In other words, we are now seeing the shift away from the baby boomers to people in their 20’s and 30’s who are on the verge of buying a house or getting married for the first time. All those things you typically have to go to a bank or credit union for. Interestingly, Millennials make up about 42% of home buyers today and 71% are first time home buyers. As this survey from the National Association of Realtors shows, Millennials are more skeptical about the economy than their elders but they are still a key part of the home buying industry.

The article goes on to explain how companies ranging from Home Depot to Briggs & Stratton are retailing their retail efforts to respond to this demographic bubble. For example, retailers are responding to a generation which probably spent more time on x-box than helping Dad with a home construction project by offering basic classes such as how to use a tape measure.

The lessons and/or warning signs for credit unions are obvious. The average age of a credit union member is somewhere around 47. And let’s be honest, our conventions can easily be mistaken for retirement village outings. As former NCUA Chairman, Debbie Matz commented a couple of years ago, “If the trend of aging credit union membership continues, many credit unions may have no future”

The good news is that this trend doesn’t have to be a threat. It’s actually an opportunity. For one thing, surveys tell us that this is a generation that has learned the lesson that excessive debt is a bad thing. It also has grown up in an internet culture that at its best emphasizes community relations. In short, credit unions stand for much of what the younger generation finds attractive. To those of you who have tried to capitalize on this, good job. To those of you haven’t, either start planning to do so or decide who you’re going to merge with.


October 10, 2017 at 9:04 am Leave a comment

More Bleak Medallion News

Crain’s is reporting that 46 NYC taxi medallions were valued at $186,000 a piece at a private auction in Queens on Monday. The paper reports that a 6% premium paid to the auction house meant that the final purchase price was approximately $198,000.

The auction has been anticipated within the industry since it offered an opportunity to see if the price of medallions has stabilized. The winning bid is in contrast to New York medallion prices in excess of $1 million as late as 2013. It indicates that the ultimate floor for medallions may be even lower than the industry’s most pessimistic assessments.

The 46 medallions were owned by the self-proclaimed medallion king, Evgeny “Gene” Freidman, who filed for Chapter 11 Bankruptcy. Taxi Cab Management, Inc. of which he was the owner, held more than 800 medallion taxi cabs in Manhattan, Woodside, Brooklyn and Long Island City. In June of 2017 he was arrested by New York’s Attorney General and charged with tax fraud for allegedly failing to turn over $5 million worth of surcharges that were due to the Metropolitan Transportation Authority.







September 22, 2017 at 8:40 am Leave a comment

DACA Debate Likely to Impact Lenders

President Trump’s announcement that he was ending the Delayed Action for Childhood Arrivals (DACA) in six months unless Congress passes legislation addressing the issue has important implications for lenders as individuals affected by the President’s announcement turn to the courts for protection.

The DACA program was instituted by President Obama in 2012. It allows qualified individuals who are illegal aliens who entered the country as minors to receive renewable two-year periods of deferred deportation. They are also eligible to receive work permits.

When I heard about the President’s announcement, I figured that now would be a good time to update you on the status of a case which has important potential implications for lenders. In Perez v. Wells Fargo & Co., Case No.: 17-cv-00454-MMC, DACA recipients are suing Wells Fargo claiming that the bank’s lending policies violate federal civil rights law. Each of the highlighted plaintiffs applied to the bank for a loan. Nonetheless, they argue that they were denied loans ranging from student loan applications to a loan for commercial equipment. Each claims that they have a U.S. citizen as a willing co-signer but that the bank categorically refused their applications.

Here’s why I think the case is potentially so significant: In its motion to dismiss, Wells Fargo argued correctly that under the Equal Credit Opportunity Act (ECOA), it is not prohibited from discriminating against the person on the basis of alienage. In other words, the ECOA prohibits discrimination against someone because they are Hispanic but does not prohibit basing a lending decision on a Hispanic person’s immigration status. Conversely, the plaintiffs in this case argued that the ECOA should be interpreted in conjunction with 42 U.S.C. § 1981. “42 U.S.C. § 1981, which provides, in relevant part, that “[a]ll persons within the jurisdiction of the United States shall have the same right in every State and Territory to make and enforce contracts . . . as is enjoyed by white citizens.” This federal law has been interpreted to not only prohibit racial discrimination but discrimination on the basis of immigration status.

On August 3rd, the court sided with the plaintiffs. It ruled that § 1981 could be read as complementing the ECOA rather than conflicting with it. Specifically, the court concluded that it is appropriate to interpret federal law as barring not only discrimination in lending decisions under the ECOA but also discrimination against persons on the basis of their immigration status under § 1981. This expansive ruling, if upheld on appeal – and I’m assuming there will be an appeal – represents an extremely significant expansion of lending anti-discrimination law.

Cordray For Governor?

Strike up the Pretender’s music: It looks like CFPB Director, Richard Cordray is going back to Ohio.

On Monday, he did nothing to quiet down speculation that he is going to run for Governor of Ohio when he quits his job as the head of the CFPB. He gave a speech in Cincinnati to a gathering of the AFLCIO in which sounded an awful lot like a populist campaign speech. For example, in his speech he stated that “We need to be able to see that wherever we start in life, we can advance through our own merit and hard work. We need a marketplace, and a justice system, and other key pieces of our society to operate more effectively and truly reflect the principle that every one of us counts” This sounds a lot more exciting than talk about overdraft fees.

September 6, 2017 at 8:53 am Leave a comment

Lessons Learned From Sandy Can Help Houston Recover

As I watched the news of the devastation caused by Hurricane Harvey last week, I couldn’t help but think back to the lessons learned by New York lenders as they dealt with the aftermath of Hurricane Sandy. Here are some of the key ones to keep in mind as we deal with yet another epic natural disaster.

  • There is no such thing as too much communication. Many banks and some credit unions I believe were unfairly criticized for failing to quickly disperse insurance funds on damaged property on which they held a mortgage. By all means, lenders should move as quickly as possible to cut checks and approve payouts in situations where they are an insured payee on mortgage property damaged by Harvey. But the need for speed must be balanced against the need to ensure that needed repair work is actually being done. This process will take time. I believe a lot of confusion could have been avoided in New York had lenders been more proactive in explaining not only to members of the public, but to legislators the role that lenders play in the insurance process.
  • This no time for sectionalism or political posturing. The national discourse hit a new low when, in the aftermath of Hurricane Sandy, conservative hard-liners in the House of Representatives initially baulked providing disaster funds to the northeast. Fortunately, commonsense prevailed. Events such as Harvey are national disasters that need national solutions. Not everything has to be political.
  • The most immediate concern is that the National Flood Insurance Program expires on September 30th of this year. On the one hand, Harvey will undoubtedly provide the needed impetus to get the program reauthorized. On the other hand, we need to take a real serious look as to how this country protects itself against floods and storm damage. On paper the existing system makes sense. Homeowners wishing to buy property in communities prone to flooding are required to get insurance. In addition, lenders must ensure that the appropriate insurance is maintained. In reality, the system is woefully inadequate. As storms such as Harvey, Sandy, and Katrina become the “new normal”, policy makers have to recognize that there simply is not enough money stashed away to adequately insure against future disasters. They must either make some tough choices to limit where people can live or they have to make a national commitment to a much more robust insurance framework.

September 5, 2017 at 8:41 am Leave a comment

What You Need to Know About HMDA Before I Go On Vacation

Greetings! I’m going away on vacation for a week. Before I do, I wanted to give you a heads-up that the Bureau That Never Sleeps (AKA the CFPB) finalized last second amendments that kick in for covered institutions for mortgages that close on or after January 1, 2018.

Most importantly, our national trades deserve a round of applause. Under the regulations as initially proposed, HMDA reporting would have been required for institutions that do 100 or more home equity lines of credit. The CFPB agreed to a two year transition period during which the reporting will only be required for institutions that originate 500 or more HELOC’s.

The Bureau also finalized amendments to deal specifically with New York’s CEMA loans. NYS §255 enables borrowers to utilize a three-step process for modifying loans. Generally, a supplemental mortgage laying out new terms of an existing mortgage loan is created; a new mortgage loan, often made with the same lender includes cash out for the borrower; and finally these two new loans are consolidated into a new loan document. Borrowers pay a mortgage tax based only on the amount of the new monies advanced, as opposed to the paying based on the combined amount of the original mortgage plus the new funds. The Federal Reserve Board traditionally interpreted HMDA as not applying to CEMA loans, as the original note is not fully extinguished. In its 2015 amendments to HMDA, the CFPB departed from this traditional interpretation of HMDA Regulations and concluded that “both assumptions and transactions completed pursuant to New York CEMAs represent situations where a new debt obligation is created in substance, if not in form” ( Home Mortgage Disclosure (Regulation C), 80 FR 66128-01.

With these regulatory amendments, the CFPB is amending the regulations to clarify that new funds advanced under CEMA transactions are reported only in so far as they are part of the total amount of the new consolidated CEMA loan. The entire transaction must be completed in the same calendar year.

The final rule also makes several other technical but important changes, including providing further clarification on how to comply with the expanded requirements for reporting a mortgage applicant’s race and ethnicity. Incidentally, this is one of the key operational changes that you should be discussing with your front line mortgage staff as it prepares to comply with HMDA. This is an issue that I will be blogging on in the near future. Don’t get too excited.

                                                                     Another Ugly Game of Chicken

President Trump raised the stakes on the debt ceiling debate yesterday when he criticized House Speaker Ryan and Senate Majority Leader Mitch McConnell for refusing to tie legislative priorities to the raising of the debt ceiling. The national debt is effectively America’s credit card. If the government doesn’t raise its spending authority by the end of September, it will be unable to pay bond holders who finance the country’s national debt. Even a short delay in payments could have severe economic consequences for the country as a whole and financial institutions in particular. Let’s hope that common sense prevails. Refusing to pay your bills doesn’t make you more conservative, it makes you more reckless.

Blog Hiatus

Yours truly will be off on his annual late summer blog hiatus. If all goes according to plan, I will be taking my 8 year old to the Baltimore Orioles game against the Seattle Mariners on Wednesday and getting to Alexandria, Va. in time for my nephew’s wedding on Saturday. When I return on September 5th, I will be bright-eyed and bushy-tailed, ready to start my 7th year of blogging. Thanks for reading!

August 25, 2017 at 9:08 am Leave a comment

Two Reports You Have To Read

Those of you in charge of anticipating where interest rates are headed or attracting and retaining the best employees, should take the time, assuming that your retinas are still in working condition, to read two recent reports released by the Federal Reserve Banks of San Francisco and New York. One report unveils a new survey intended to gauge employee sentiment and the other offers yet another plausible explanation for why we have not seen pressure to increase wages even as the unemployment rate continues to tumble at a rate almost as fast as the President’s approval ratings.

As readers of this blog will know, yours truly is becoming obsessed with the issue of inflation and wage growth. Simply put, if the economy is growing and the unemployment rate is dropping, why aren’t we seeing more upward pressure on prices in general and wages in particular?

The New York Federal Reserve has just introduced a new labor market survey which may help answer those questions. According to the New York Fed, the survey is the first which focuses on employee experiences and expectations. For example, it asks respondents how many job offers they have received and breaks them down by age. In July, 22% of persons under 45 reported receiving at least one job offer in the past four months compared to about 13% of older respondents.

A key question that this survey may help answer is, why has there been so little churn or job movement? In a well-functioning free market economy, churn is key since it both creates jobs for young employees and rewards the best performers with new growth opportunities. According to the survey, workers with annual household income of $65,000 or less are more likely to predict that they will be switching jobs or becoming unemployed in the near future than higher income employees. According to the Fed, these predictions are actually good indications of where the economy and the labor force is headed.

A second report produced by the Federal Reserve Bank of San Francisco has me scratching my head a little. It reports that wage growth is improving and that such growth, “may be even better than the headline number suggests.”

The good news is that wage growth for continuously full-time employed workers is currently in line with the wage growth peak of 2007. The bad news is that the entry of new and returning workers to full-time employment is holding down aggregate wage growth. The bank goes on to explain that, “As the labor market has continued to strengthen, many workers have moved from the sidelines of the labor force or part-time positions into full-time employment. The vast majority of these new workers earn less than the typical full-time employee, so their entry brings down the average wage.”

Now I don’t know why  the Bank considers this good news exactly. It means that the glut of under employed workers is so large that there is little pressure on wage growth. This type of report makes me wonder why the Fed is even considering raising interest rates any time soon.

August 22, 2017 at 8:48 am Leave a comment

Operation Chokepoint Strangled by Justice Department

Operation Chokepoint, the initiative of the Obama Justice Department to clamp down on payday lenders and firearm distributors by discouraging banks and credit unions from providing financial services to them, was officially declared dead by the Trump administration on Friday.

To its critics, Operation Chokepoint was an overly aggressive use of regulatory and legal power by the Obama administration to harass legitimate businesses with which they disagreed. Although supporters of the initiative claimed that the Justice Department’s efforts were exaggerated, the FDIC felt the need in 2015 to encourage banks to continue to take a “risk based approach based on the attributes of individual customers rather than declining to provide banking services to entire categories of customers.”

In a strongly worded letter released on Friday, the Department stressed that it would “not discourage the provision of financial services to lawful industries, including businesses engaged in short-term lending and firearms-related activities.”

Regardless of which side of the ideological spectrum you find yourself on, the push back against Operation Chokepoint was both appropriate and necessary. No bank or credit union should be used as a means for pressuring legitimate businesses to stop dealing with customers that governments don’t like.

On that note, go get your eclipse-watching protective gear ready to go. Unless I’m blinded by the light, I’ll be back tomorrow.


August 21, 2017 at 8:31 am Leave a comment

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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