October 20, International Credit Union Day, is officially a day when we recognize and appreciate credit unions and the role they have played in support of their members and communities.
At Cenlar we’re deeply aware of the value of credit unions and we are respectful of the ethos that governs their operations. Many of us at Cenlar had our first experiences in financial services working for credit unions.
According to mycreditunion.gov, Germany’s Friedrich Raiffeisen created the first rural cooperative lending institution for farmers in the 1860s. Modern credit unions were modeled after this effort.
What characterized credit unions from the start was the participation of working class people who might not have had access to large financial institutions. In addition, the people who made up and governed credit unions had some other affinity with each other, including ethnicity, religion, occupation or other special interest.
The first credit union in North America was in Canada in the early 1900s. A few years later the model spread to the United States in 1908, serving French-speaking immigrants who had settled in Manchester, New Hampshire. Today, the National Credit Union Association says there are approximately 5,000 credit unions with total assets of about $2 billion in the United States alone.
Many U.S. credit unions now have their loans serviced here at Cenlar. We know both the history of credit unions and what they have become.
Tens of thousands of credit union members were drawn to these institutions through traditional affinities. Americans still join credit unions based on religious faith, ethnicity, neighborhood, military service or even where we went to university.
Many credit unions are localized and have historically been sources of economic stability in both rural and urban communities. There are thriving communities today that owe much of their existence to credit unions. It is where a farmer, steel worker or school teacher got their first loans for a car or a home.
Credit union members can count on several things. Their rates on deposits and loans are highly competitive. Since credit unions are owned by their members, they can influence how a credit union is actually run. But maybe most of all, credit union members expect an extraordinary level of customer service.
Credit unions’ cooperative model can yield some positive results during crises. A report from the Credit Union National Association (CUNA) showed August’s delinquency rate was 0.49%, up from 0.45% a year earlier but slightly lower than the revised 0.50% for July 2022. While the quarterly Mortgage Bankers Association National Delinquency Survey cited the national delinquency rate in the second quarter at a very low 3.64%, credit unions delinquencies still remain lower.
Growth, though, can challenge the credit union model. A small credit union serving a small number of members with a limited number of product offerings in a localized geography can manage very high levels of service entirely in-house.
That has largely changed. Expanded affinity groups, and a wider array of products has brought a great deal of growth to credit unions -- as well as the need for sophisticated partnerships.
It is one thing, for example, for a neighborhood credit union to service a member and a mortgage loan in that neighborhood. Suppose, though, that the member now wants to buy a home and get a mortgage for a property in Florida? Indeed, a credit union member based on military service or university affinity could be anywhere in the United States.
Federal and state compliance laws and regulations for lending and servicing often change. Credit unions need partners nationwide with servicing expertise and an ongoing commitment to maintaining that expertise. If the pandemic taught us anything it is the need to work with nimble servicing partners current with both federal and state laws and regulations and a process to track and implement those changes.
Credit unions now need partners skilled in recognizing and managing risk. While credit union default rates remain low, they are hardly unknown and credit unions need partners who are, first, committed to keeping homeowners but able to thoughtfully manage those loans destined for foreclosure.
That is often us. More than our technology, expertise and agility, there is another reason credit unions choose us as partners. We want to bring the same level of service to the credit union that it brings to its members.