The Great Mortgage Refi: Should We?

by Ron Daly 

Remember Superman: The Movie when Superman flew around the world and spun time backwards? That way, he could save Lois Lane, stop Lex Luthor, and whitewash all the unpleasantness that ever happened. I'm not a physicist, but I'm not so sure that would work. And if it did, why stop there? Why not keep flying backwards and stop Lex Luthor before he even hatches his evil scheme? 

I bring it up because someone wants us to fly backwards and undo a disaster. Not a physical or natural disaster, but a financial disaster. The article "Time to consider mass mortgage refinancings" by Allan Sloan in the Washington Post sheds light on a shocking idea: that we could refinance the mortgages of qualified-but-financially-stressed borrowers and actually save ourselves some money and some risk.

From the article:

I’m talking about providing a cheap, streamlined and simple way to refinance fixed-rate mortgages backed by Fannie Mae and Freddie Mac, which own about half the nation’s mortgages and are now effectively owned by the federal government. Fannie and Freddie creditors were bailed out in 2008 when Uncle Sam put the firms into conservatorship to avoid their having to file for bankruptcy; as we’ll soon see, those creditors, consisting primarily of big financial institutions, would bear the cost of helping homeowners.

Mass Fannie and Freddie mortgage refis could provide billions of dollars of economic stimulus and support the prices of homes, many Americans’ biggest single asset. All while costing taxpayers nothing.

This isn't Sloan's idea - it was formulated by a group of experts from Columbia University; among them, a former economic advisor to George W. Bush. Their data and their proposal are available for review [click here to see it]. All of this comes around the same time as President Obama's plan for widespread refi, mentioned in his State of the Union 2012 address [click here], which draws much of its power from new taxes on institutions with more than $50 billion in assets. Many praised that plan, but it seems as though Congress won't play ball [click here].

My questions:

1. Should these massive refis happen? 
2. Will they happen, and when?
3. Will it be the saving grace of the embattled housing market? 
4. How will credit unions be affected? Positively or negatively? Do we get anything out of this? 

If you've got answers, I'd love to read them. Leave us a comment below and let's talk about it. 

We're declaring national "Take your Compliance Team to Lunch" month!

I'm not sure why this is, but most CU people I know don't look forward to an appointment with their dentist, NCUA or their Compliance Officer. Compliance and Internal Audit are thankless jobs that play an important role in keeping financial institutions safe and on track.

With all the bad rap Compliance Teams get, I thought we'd point out some recent conversations of how Compliance Officers are looking for ways to make Compliance a profit center. Once you CEOs and CFOs stop laughing, read on.

Compliance as a Profit Center?

Banks and Credit unions are finding ways for their organization to save money based on recommendations derived from the Compliance Team. So when you think about it, if they save enough money for an organization, Compliance could be a profit center when looking for ways to reduce costs and still be in compliance.

For example, are there paper disclosures that are printed over and over again due to regulatory changes that can be switched to electronic delivery? How about daily notices that are printed and mailed that are more a "courtesy" than a required mailing?  Are there ways for the CU to go "green" and still comply with ESIGN? (good ESIGN info in this compliance post but you'll need to be a subscriber to read it online)

In this post on the Trinovus Blog "Make Compliance a Profit Center", they suggest three ideas for financial institution Compliance folks to consider which help improve the bottom line.

Anthony Demangone, NAFCU's Senior Vice President and Chief Operating Officer, when asked if his view of compliance changed due to his new role at NAFCU, shared five ways folks can really help themselves as compliance officers.

1. Bone up on your communication skills.   
2. Think globally about your credit union. 
3. Options. 
4. Understand statistics, PowerPoint, and Excel. 
5. Come with solutions.

(Read the full post here)

Granted, not everything from Compliance will save money. But if Compliance folks just find one big way to save money, make the recommendation with an estimate of how much the organization will save and watch management's attitude change as compliance helps improve the bottom line in these tough times.

So, we're declaring national "Take your Compliance Team to Lunch" month! There's no one better equipped inside your organization to figure out how to comply with all the regs and save you money. In November, walk down the hall and just say hello. Or bring them coffee and a pastry when the office is having a breakfast meeting without them. Even better, add a little more light and turn on the heat in their work areas. Compliance Officers are people, too!

What do you think? Can it work? Have ideas to suggest where your Compliance Team has saved you money and improved your bottom line?

 

Calling All Credit Unions - How CUs are Helping After Irene

 by Ron Daly 

Hurricane Irene is still affecting a large swath of the East Coast, leaving thousands without power and with significant home damage and flooding. In hopes of helping members, credit unions on the East Coast and from around the country are reaching out to help. 

From USA Today:

When homeowners in the Houston area had to wait 45 days for insurance checks after Hurricane Katrina, Chartway Federal Credit Union advanced personal loans so customers could stay in hotels and pay monthly bills until they received the insurance money. "And we'll do the same now," says Ron Burniske, CEO of Chartway, which has 63 branches across the country...

Chartway is willing to let members affected by Hurricane Irene skip loan payments. It says its plans will evolve as it hears what members need. "Unlike most institutions, we will not go out and decide what they want and need," Burniske says. "We can turn a product around in 12 hours."

On the larger, national level, NCUF has activated CUAid. From their website:

The National Credit Union Foundation (NCUF) has activated the online disaster relief system CUAid.coop to raise money for credit union people along the East Coast affected by Hurricane Irene...

Credit union supporters in every state can now make donations through a secured website that accepts credit cards and wire transfers (www.cuaid.coop). CUAid is the only program of its kind that enables credit union employees, volunteers, and members, as well as credit unions and credit union organizations across the U.S., to contribute directly to support other credit union people.

A tip of the hat, both to Chartway and NCUF. Way to move fast and respond to a situation that has left a lot of your members and clients hurting. Here's hoping more folks get the help they need as we move toward recovery and clean-up. 

These are just two of many initiatives that CUs and their organizations are putting out there to help. Can you share another in our comments section?