|Mortgage Mess Mounts at Credit Unions|
Credit Union Journal | Tuesday, November 27, 2007
PASADENA, Calif. – The spreading fallout from the depressed mortgage market continues to mount at credit unions around the country, even at those institutions with little exposure to the subprime market, forcing some hard-pressed members to default on their credit union loans.
The spillover effect is causing healthy credit unions and banks to set aside new loan loss reserves and report losses in markets that recently counted on the run-up in home values to pad personal wealth, according to the president of Wescom Central CU which reported a $9 million loss for the third quarter. "Thousands of our members have these types of loans (with other lenders) and as the loans are repricing and payments are being reset it’s breaking the budget for them," he told The Credit Union Journal last week. Wescom moved an additional $10 million to the allowance for loan loss so far this year and plans to add still more reserves in the fourth quarter. "It’s going to get worse before it gets better," he said.
Mortgage-related woes of one kind or another have forced several large credit unions into bankruptcy in recent months and caused others to wrack up big losses, including the recent failures of Huron River Area CU and Norlarco CU, which had more than $400 million of mortgages in the deflating Florida home market. Other examples include Cal State 9 CU, which reported a $37 million third quarter loss due to its home equity program, and Allco CU, which reported almost $6 million in real estate-related losses for the first three quarters of the year.