Get your college student out of your house...and into your other house?

by Ron Daly

Most of you folks have already taken your college students back for another year of higher learning. Man, is that on campus housing ever expensive!  Wouldn't it be nice if there was available real-estate near your child's college? 

Chances are, there are houses and apartments abound near your young person's school...and that could mean a real-estate treasure trove for you. 

From the Washington Post: 

By buying a place and taking out a mortgage, non-deductible dorm rents can be converted into tax-deductible mortgage interest payments.

Parents also benefit from tax deductions for real property taxes, depreciation and the costs of repairs and replacements, as well as travel expenses to locate, acquire and periodically inspect the investment property. The parents' tax burden might also be lessened by the capitalization and amortization of capital improvements made to the residence.

The article presents a pretty compelling case for buying a piece of real estate near a school, focusing mostly on write-offs and tax deductions, but also points out the benefits of not moving your student every year they're in school (hallelujah) and the eventual resale value of a building for whom there will always be interested buyers and renters. 

It's not all smiles, however; the article presents several drawbacks to owning a home near the university, including...well, the fact that your university student will have a home of their own to manage - or not manage - or, heck, outright destroy. Being a landlord is tough enough, but then there's dealing with your own kids as tenants and college students. 

My take? If you've got the means, you should go for it. Your student needs a place to stay, you need a write-off or two, the economy needs a pop in first-time home sales - everyone wins! If the money's cheap, make it happen. Just be very specific about your expectations to your young person before you hand over the keys. 

My take as far as credit unions go? How about a lending-bundle? Programs like Student Choice are making student loans from CUs more convenient to find and programs like CU Realty are giving you great mortgage rates and even cash back. A borrower that's smart enough to smell the opportunity is a borrower you want. 

What do you think? Let us know in the comment section below. 

HAMP Hampered

by Ron Daly 

The successes of President Obama's financial programs have been debated by pundits for the past year or so. Some say that progress is naturally slow in recovery and that the seeds of these initiatives will bear fruit for years to come. Others say that the programs have not helped enough in the short term to warrant their continued support. 

One program being debated currently is the Home Affordable Mortgage Program, or HAMP. A recent story from ABC News talks about the program - its proponents, its opponents, and its short-term success. 

Watch the video below. [EMAIL READERS - please visit the website to view the video. Flash player required.]

According to the online version of the story, only 116,000 homeowners have taken advantage of the $75 Billion program thusfar. Only 116,000 on a program designed to help 2 million? Why? Because bankers won't help customers and would rather foreclose. This has led some lawmakers to call the program a "failure" and has prompted the Treasury to suggest a stronger hand. If the Treasury and the Obama Administration had their druthers, banks would be required to see if homeowners qualified for HAMP help prior to foreclosure. Banks would only be allowed to begin the foreclosure process after a borrower had been officially unqualified. 

Your One-Stop GAC Wrap-Up

by Ron Daly 

Being based just a few miles outside DC has its advantages. Chief among them, we were able to pop in and out of the GAC and meet with our clients, our friends, and our fellow CUSOs. While we didn't hit any of the big talks or breakout sessions, we didn't feel out of the loop. Nor would anyone else, I would wager, as CU professionals from across the country that were attending the GAC were eager to share their thoughts via blogs, emails and social media outlets of all kinds. We thought we would do a service to our followers that might have missed some of the highlights of the week and try to bring all those links and stories together in one place. If you feel there's a link or two missing that might be vital to people reading along at home, leave us a comment with the link in it down in the comment section. 

BEFORE CONFERENCE: 

morrischris: For all you GAC attendees & burger lovers, there is a Five Guys about a block from the convention center. Thought you should know. #GAC10

A few enterprising CU professionals created a "hashtag" label for Twitter posts related to the GAC. If you want to see how the whole thing unfolded in 140 characters, go to Twitter's search page and search #gac10. 

Certainly one of the most talked about parts of this particular GAC was the "Crashers", a group of young CU professionals dedicated to making their CUs better. Crash the GAC was started by Brent Dixon of The Haberdashery and Filene, who took the idea to CUNA. CUNA offered a number of scholarships so that attendees wouldn't technically be "crashing" in the traditional sense, and Palmetto Cooperative Services LLC sponsored a number of beds at the DC Hostel for attendees. As Crashers went about the conference, they wore their custom CU*Swag shirts with their slogan "Five Star Leaders, Two Star Lodging". Having received a CU*Swag shirt (Jimmy won one and gave me his - It's a nice shirt!), I can say they'd be great for any CU that wanted to deck out tellers in some custom gear. 

HIGHLIGHTS FROM THE GAC:

aplusfcu: Packed crowd here at the GAC Opening Session. Lots of talk about job creation. #gac10 http://tweetphoto.com/12186755

The kickoff started with David Gergen, former presidential advisor and pundit, talking leadership in the Nation and in finance, and stating "The great American job machine is broken" and that innovation will be the key that gets it started again. 

CUNA President and CEO Dan Mica was greeted by a standing ovation when he took the stage for what will be his last GAC in said position. His talk centered around raising the MBL, the hot-button issue this year to be sure. His talk seemed well received by the majority of CU citizen journalists in attendance. [Read Dan Mica's opinion column here]

The MBL echoed throughout the conference, with more and more breakout sessions and private meetings devoted to its discussion. Gigi Hyland, also of the NCUA board, spoke her mind on day two about raising the MBL cap and the forward momentum of CUs through 2010, which she admitted would be a "tough year". She also gave due attention to the Crash folks, much to their delight. 

Debbie Matz, the newest chairperson from NCUA, took the stage to talk about what she felt should be key goals for every credit union in the nation, including expansion of online services and payday loan alternatives. [Some more thoughts from Matz in this article from cujournal.com]

CU_Ninja: RT @Paulsworld: Debbie Matz: 4 ways for CU's to succeed. Alt capital, biz lending, payday alternative and electronic services. #GAC10

There were quite a few impressive guests this year, including Joe Scarborough, Alan Greenspan, Ondine Irving, and even Reggie Bush snuck in at one point to the delight of attendees. Needless to say, if you weren't there, you missed out on a lot of interesting talk and a lot of insight. 

robwright: Hike the Hill! #gac10 http://tweetphoto.com/12386760

Wednesday was the day for attendees to "Hike the Hill", visiting with representatives and lawmakers from across the country on CU matters. Representatives Barney Frank and Spencer Bachus (MA and AL, respectively) stopped by Wednesday morning for a chat with attendees on Interchange Fees (which Frank said was not on the table) and, of course, more MBL talk (which Bachus said would be a tough fight for CUs to push through). Attendees then met with lawmakers to talk credit union issues, racking up pictures and stories along the way. 

Jimmy Marks, our CMD, and some of his Crashing buddies were also behind a "tweetup", a meeting of Twitter users in attendance. I'm told it was a big success and that there were some great conversations happening in the midst of all those young whippersnappers. 

FOR THE FULL EXPERIENCE: 

I couldn't possibly tell you everything that happened at the conference and around the conference - to do that, I'd have to start blogging Monday and not quit until the end of the week. Which the folks below did!

Carla Day of CU Chat Up was a one-woman GAC reporting supercomputer. She typed her poor thumbs right down to the knuckle on her Palm Pre, live-blogging and reporting events as they happened. To get a great recap of the whole experience, see her personal Twitter feed.  

To read about the full day's worth of events through Wednesday, spend some time with Rob Rutkowski's "That Credit Union Blog" which did a day-by-day recap. Read all about it here. 

The CU Water Cooler gang made time for a "Liquid Lunch" chat podcast, which can be heard here. 

If it gets summed up much better than this, let me know: 

Matt_Vance: At DCA getting ready to fly home. GAC has come to a close but the ideas, projects & action are just getting started #gac10.

What Did We Learn?

by Ron Daly

2009 has been a year of learning. We've learned all about credit default swaps. We've learned how badly our new members had been treated by their former big banks. We've learned how to do more with less when it comes to marketing budgets, collections budgets, staff shortages - it's been a make-or-break year for the industry, to say the least. 

Here's some basic lessons: 

1) The amount of financial advice out there in the world is astounding. The quality of that financial advice is embarrassing. 

2) Just when you think our industry has hit the bottom of the problems we're facing from this recession, someone throws us a shovel and yells "keep digging". 

Let me cut to the point here...did you ever think we'd be looking at a time in our country when walking away from a mortgage was a good idea? How about a time when people recommended it? 

People like Dr. Brent T. White. A law professor at the University of Arizona, Dr. White recently published a paper titled "Underwater and Not Walking Away: Shame, Fear, and the Social Management of the Housing Crisis".  

His recommendation? The 15-million people with underwater mortgages should just walk. 

15 million people? Let's be optimistic and say those people only borrowed $300,000 on average. That's $4.5 trillion dollars that'll never be recouped. For better or worse, the housing market will never again be what it was. So banks and CUs won't be able to unload those houses, nor does the land beneath them necessarily mean anything to anyone, as developers in personal and business real estate aren't making any moves until the picture's less bleak. Whenever THAT is. 

What's more, it doesn't seem as though Dr. White is in the minority. This story from NPR.org highlights "walk-aways" and a service designed specifically to help them work toward a strategic default.

This isn't a new problem (that NPR story is from two years ago, when the bottom just started coming up at us). A segment of this Newsweek piece from March states: 

The study is based on the data of some 45 million properties that carry a mortgage, which accounts for more than 85% of all U.S. mortgages. The data was filtered to include only properties valued between $70,000 and $1.25 million. 

The most severe "underwater mortgages"—mortgage loans that are 125% or higher than the value of the property—are in five states: California (723,000), Florida (432,000), Nevada (170,000), Michigan (128,000), and Arizona (122,000). Underwater homes are of serious concern because for some homeowners there is little incentive not to walk away and allow the home to fall into foreclosure. Foreclosed homes drag down the prices of neighboring properties, possibly dragging more homes underwater. 

A veteran real estate broker in Las Vegas who declined to be named said that in 2004 there were only 2,000 homes on the market; now there are some 20,000 and growing. "Everybody became crazy," she said. "In certain areas [home prices are] off 60% from the peak. It's really sad because there's no equity and people can't refinance."

We're looking at a quicksand situation here. If people start walking away from their mortgages on "good advice" like that mentioned above, it will just topple what little is left of the housing market like a string of dominoes. And whatever happened to "promoting thrift"? We must not be doing a great job of that, considering the number of bad mortgages floating around out there. But, then again, maybe people weren't as willing to listen to us "conservative lending institutions" then as they are now. Is now the time to remind people that running away from your crummy mortgage will hurt you? When and how can we make people learn that cut-and-run won't do?

I haven't read Dr. White's entire paper, but I do know this - a default isn't a good thing. And no, I don't agree that you can recover from it inside of two years by paying down the balances on your cards and being otherwise responsible. Where do you live after you've been booted from your home? How do you start recovering? Because like it or not, those two years back to your healthy credit rating are going to be a tough slog.

I'm sure there is a great counterpoint as to why consumers should just walk away...I'd love to hear it.

Duh of the Week: A PennyMac for your thoughts

by Ron Daly 

Once upon a time, there was a giant lending house called Countrywide. When the financial crisis struck down a number of lenders in 2008, Countrywide was one of the first to go. Having gone through two years of controversies, lawsuits and accusations by the SEC, Countrywide had to be absorbed by Bank of America. BofA has decided to dissolve the Countrywide brand altogether, as thousands lost their homes and their mortgages due to over-inflated appraisals and bad lending and payment policies. 

But the story doesn't end there. The former Number Two at Countrywide, Stanford Kurland, decided to open a new vulture firm - nicknamed "PennyMac"  [click here for the CU Journal story].

The business model, as it's explained in this Business Insider article, works as such: PennyMac buys bad loans from busted banks or the FDIC for next to nothing, follows up with the homeowner and asks if that homeowner wants to keep paying for the loan at a reduced rate, then makes double the price they paid for the loan in profit. 

Stop laughing, I'm not joking. 

Guest Author Melina Young: Get a Coffee – Save $300 Million

Melina Young is an owner and president of Credit Union Strategic Planning. Her research has been featured internationally and most recently at a symposium in India. She is a regular guest lecturer at the University of Washington. Melina is the project lead for one of the fastest growing small credit unions in the world. She bats 1000 at grant writing, securing six figures annually for credit unions. Of the five grants she authored in 2008, all have received funding.

Melina is also one of the bright minds behind the American Debt Relief challenge, the widget of which recently debuted at the top of CUJournal.com. To give you more information, we asked Melina to be a guest author and walk you through the ADR - how it came to be, who's behind it and where she and her group hope to go.  

Get a Coffee – Save $300 Million

"You won't believe the 4-hour coffee conversation I just had," my business partner Jamie Chase said to me a few months ago. "We are going to help credit unions grow their net revenue while saving consumers $300 million." Intrigued? So was I...

Over that coffee our friend Scott Butterfield described a balance transfer program to Jamie which saved the average family $200 a month. That's a table full of groceries or a car payment for most families. "Credit unions across the U.S. are running balance transfer programs," Jamie said excitedly. "What if we measured the national savings?"

The Non-Existant Red Line: Congress Seeks to Make CUs Do What They're Already Famous for Doing

by Ron Daly

In 1977, Congress sought to make banks pay for the unbecoming practice of "red-lining". This was a sort of financial gerrymandering, in which banks would not offer services to areas with low incomes or high minority populations. To scold the banks for this practice, Congress enacted the Community Reinvestment Act, or CRA. 

Fast forward 32 years. With a jaundiced eye on all financial institutions, Congress is seeking to hold anyone who lent or still lends money accountable for more community and low-income lending. This is not surprise to the Soapbox, as Dan Mica told us about Rep. Barney Frank's charge to make every lending institution accountable (read about that here). But Congress wants to push CUs into the CRA (click here for the CU Journal article). This, folks, is no good. 

If Capitol Hill Called Up the CU Industry...

[Industry Analyst Elliott Kashner from CreditUnions.com wondered what would happen if Congress decided to aim their judgement at credit unions. Elliott represents the proceedings with a script of the fictional conversation between lawmakers and CU industry head honchos: ]

I couldn't help but wonder how things might look if it were the CEOs of the ten top credit unions: Navy FCU, SECU, Pentagon, BECU, SchoolsFirst, The Golden 1, Suncoast Schools, Alliant, American Airlines, and Security Services. I'd like to imagine it would go something like this. (This did not actually happen, although the data was pulled from Callahan & Associates' First Look Program for Fourth Quarter)

Representative: Thank you all for appearing today in front of the Financial Services Committee. I'd like to start by taking a quick look back over 2008. As I am sure you all know, it was a brutal year. We’ve seen many financial giants fall. In response, Congress has passed several stimulus packages to get the economy back on its feet.
State Employees Credit Union: Well, 2008 was not such a terrible year for us. We actually saw our total assets grow by 11.28%.
Representative: I see you have been making use of TARP funds then.
American Airlines Credit Union: No, we are not currently receiving any federal funds. We were able to fuel our growth by attracting 19.41% in new shares and deposits.
Representative: Then how are you responding the to recession?

I think you can make big $$$ with TARP Cliff notes!

by Ron Daly

I’m serious, it is getting so hard to keep track of all the initiatives, who is asking for what, who is mad at whom, what the trades are saying and what all the big CUs are saying about TARP, SIP, CLF and all the other acronym programs. I heard one CEO tell a consultant a few weeks ago that they would gladly pay for a weekly executive summary of everything going on with this issue. Not a bad idea for someone else to run with! 

Of all the articles out there, I think that Steven Syre’s article in the Boston Globe “Paying a giant’s price” is worth reading for some perspectives at credit unions in the northeast. The starting teaser line...   

Guest Author: Jeffry Pilcher of The Financial Brand

We've been following stories about credit unions and TARP in the CU Journal (like the one from earlier this week - click here) for what feels like ages. First, credit unions are in; then, they're out. We're up, we're down - it gets confusing. 

One person who's also confused about the role of credit unions in TARP is Jeffry Pilcher, E-I-C of "The Financial Brand", a very popular blog for finance news, branding and everything in between. In addition to being a successful branding and marketing consultant (His company, IconIQ, can be found here), Pilcher spends countless hours pouring over news sources and tracking what's "hot" when it comes to personal finance. 

He decided to share with us his thoughts on CUs and TARP. 

 

Do natural person credit unions need TARP money or not?

Who really knows? One thing that’s for sure is that the credit union industry’s leadership has not offered a consistent explanation about why credit unions should be included in the TARP bailout. The rationale bounces around with each week that passes. 

Here’s a look at the range of reasons -- some contradictory -- being offered by credit union leaders, in what appears to be a shotgun, try-anything-if-it-might-work strategy: