20 THE NAFCU JOURNAL March–April 2023 Rising costs of homes, goods and everyday items such as groceries, and increasing interest rates are all affecting credit union lending and compliance departments. While the borrowing behavior of members varies depending on the products provided or the membership served by the credit union, the effects of inflation and higher interest rates have led to new or renewed focus on strategies for some credit unions. “Interest rates are definitely affecting our members,” said Nathan Anderson, executive vice president and chief operating officer for Mountain America Credit Union. “People who have 2% fixed-rate, collateralized loans, such as auto loans, from last year are very happy when they see current auto loans with interest rates of 6.5% or more, but there are other people who have variable-rate credit cards who are hurting.” In November 2022, Americans held $925 billion in credit card debt, which is a rise of $38 billion since Q2 2022. According to The Federal Reserve of New York, this represents a 15% year-over-year rise—the biggest jump seen in more than 20 years.1 The combination of high account balances and rising interest rates increases the importance of education and advice for credit union members, said Anderson. “We had one member with a 2% auto loan, who also had credit card balances of $16,000 at 22% and $17,000 at 20%,” he said. “This member was struggling but when our team member suggested refinancing the auto loan to provide cash to pay off credit card debt, the member did not want to give up the 2% loan.” After showing the member how a 6.5% refinanced auto loan could reduce credit card debt— and its high interest—the Mountain America team member was able to convince him to refinance. “Now, our member is paying 6.5% interest rather than 22% and 20% and saving $1,600 per month.” Changing interest rates, especially for credit cards, are a common reason for calls to NAFCU’s regulatory compliance team, said Nick St. John, director of regulatory compliance. “Most of the calls relate to if notices are needed and how and when to provide them,” he said. “There are limits on when you can raise rates on credit cards and home equity lines of credit, so members want to make sure they comply with the regulations.” HELOCs vs. Mortgages “We are seeing a decline in mortgage loan applications due to increasing interest rates as well as relatively high home prices, but we are also seeing an increase in HELOCs,” said Katherine Lopez, director of compliance and risk management at IDB Global Federal Credit Union. “Members are deciding to invest in their current home with renovations and repairs.” At Mountain America, mortgage loan refinancing has slowed compared to past years, and traditional mortgage loans are stagnant, but there is a steady growth in certain types of mortgages, said Anderson. “Loans for first-time homebuyers, investment properties or second homes are increasing,” he said. “2022 was also the best year we’ve ever had for HELOC loan origination.” The slowdown in mortgage loan applications does have a bit of a silver lining, says Lopez. “When the volume of loan applications was higher, it was difficult and stressful for staff to manage the quality control process and ensure compliance with all regulations,” she said. “Now, we have more time for staff to not only ensure compliance with all regulations, “ We are seeing a decline in mortgage loan applications due to increasing interest rates as well as relatively high home prices, but we are also seeing an increase in HELOCs. Members are deciding to invest in their current home with renovations and repairs. ” KATHERINE LOPEZ, DIRECTOR OF COMPLIANCE & RISK MANAGEMENT, IDB GLOBAL FEDERAL CREDIT UNION
RkJQdWJsaXNoZXIy Nzc3ODM=