I recently suggested that the average community bank in
In summary, I think the vast majority of credit unions in
Credit unions are member owned financial institutions. They are non-profit and are governed by members of the credit union themselves. They employ professional “bankers” to operate the credit union on a daily basis, including making loans and acting in all members’ best interests.
Throughout the history of credit unions in the
Most credit unions in the
There are a few credit unions that do have exposure to financial difficulty in today’s . They tend to be much larger than the average American credit union, and they tend to be in large urban markets that experienced rapid residential real estate appreciation during the period between the late 1990s and 2007. Where very rapid depreciation of real estate values has occurred in the same markets during the last year, credit unions involved in large numbers of highly leveraged home equity loans are at risk. The two main markets that come to mind are in South Florida and
Palm Beach County Florida has surpassed $1.5 billion in foreclosed properties since the beginning of 2007. This has caused average housing values which skyrocketed in the years previous to 2007 to freefall since 2007. Though credit unions weren’t financing speculative real estate in
Presumably the real estate values of homes where home equity loans were made have depreciated at the same rate as other real estate in the same market. If so, this would mean many homeowners with leveraged home equity loans could owe significantly more on homes than they are worth. History has shown that many homeowners will walk away from a home in which their equity value is less than that which they owe. When they do, only the first lien holder in the property is likely to recover some of their loan loss. The credit union which is the second lien holder will not likely recover anything.
There are certain markets in
It is my experience that credit unions are not as highly monitored by Federal regulators as commercial banks, primarily because of their long history of safety. During the next year, we will see if those troubled credit unions in South Florida and
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