Lending eight bullets reveals it all


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The latest Credit Union Financial Trends Report is out, and by all appearances it seems that lack of loan growth is a thing of the past and we can all find our happiness.

If so, this will be my shortest column yet.

The problem is that even though loan growth climbed to 5.9% in the second quarter, it is still below the normal growth rate of 7%.

To make matters even more difficult, growth has been heavily focused on mortgages. If your credit union focuses primarily on these, your glass is full.

If your credit union is making more auto loans, your glass is empty. And if your credit union is still funding taxi medallions, your water could be poisoned.

Current trends, as they say, do not predict the future. In fact, only my trusty Magic Eight Ball tipster can predict the future.

Let’s see what he says about these lending sectors:

?? Indirect automatic loan. Ah, the bread and butter of the credit union lending landscape. Sadly, coronavirus and supply chain issues have made this fiscal culinary treat a country with the buttery side in the mud. We’re still going to eat it, of course, because we have to.

“Will used car loan volumes come back soon?” ” The outlook is not good.

“Is it because of supply chain issues, the concentration of used car dealers, or the shift to electric cars? ” Yes.

?? Mortgage. If this line of business were an elementary school play, it would be the bright, shiny kid who takes the spotlight before accidentally missing a line and leaving the stage crying uncontrollably.

Low mortgage rates coupled with tight inventories and high construction costs pushed up prices (pun intended).

“Will the mortgage boom continue? “ Foggy response; try again.

“Will there be more houses for sale? It is certain.

“Will the rates stay low? Don’t count on it.

So this boom will eventually go bankrupt, like the tulips in Denmark? ” Without a doubt.

?? Credit card. After a significant drop, credit card balances have resurrected, much like Britney Spears’ career. That said, credit cards are still down significantly from their pre-pandemic highs, and consumer sentiment, especially among young people, tends to avoid what they see as a “crack in shape.” of plastic card “.

“Will consumers start using credit cards again? ” Impossible to predict now.

“Will people travel again? ” Yes.

“Are people still going to eat at restaurants?” ” Yes.

“Will people buy 74 inch LCD-X TVs that may show a clogged pore on Tom Brady’s nose during the next Super Bowl?” ” You can trust it.

“They just won’t use a credit card?” ” My sources say no.

?? Business loan. Along with new car loans, business loans were one of two categories that declined in the second quarter. With office buildings half-full due to remote working, restaurants doing much of their business take-out or delivery, and other issues brought on by the pandemic, lending to businesses has been sporadic.

Some credit unions are doing well while others have declined.

The problem is to determine which changes have occurred that may be permanent versus which will be temporary.

“Are remote workers a thing now? ” As I see it yes.

“Will trade default rates increase? ” Better not tell you now.

“What are the forecasts for collective housing and other forms of housing? ” Good outlook.

?? Integrated financing, commonly referred to as “buy now, pay later,” which big merchants are deploying with the backing of big banks in an unnatural alliance.

Typically small loans, these programs require both simplicity and availability at the point of purchase. Hence the growth of companies like Affirm, which offer “pay $ 500 now or make five payments of $ 125 each!” For challenged math. Most rates start at 18% or more.

“Really? Are we back to put away?” The signs point to Yes.

“So we will need to educate members about the risks involved and come up with consumer friendly alternatives. ” Without a doubt.

JAMES COLLINS is President / CEO of O Bee Credit Union, Tumwater, Wash.

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About Wanda Dufresne

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