Top-Level Takeaways
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Unemployment is high and not just because jobs aren’t available; meanwhile, lending and home values remain strong.
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As the pandemic wears on, credit unions are responding with increased credit, reduced fees, and more.
The Great Recession and COVID-19 each convulsed the American public but in very different ways.
The most obvious is the deaths of hundreds of thousands of people from a pandemicthat still rages. But the economic impacts, although severe in both circumstances, vary greatly, too. Just one example: Home values plunged during the Great Recession;now, they’re soaring.
Credit union lenders have been on the front lines both times, helping members deal with joblessness by lending how and where others might not.
And whereas the full impact of the pandemic on financial institutions and the people they serve won’t be known anytime soon, there’s still insight to be gained from how financial cooperatives are responding.
Here, lending executives from five credit unions in Florida, Colorado, Oregon, and Michigan share their perspectives.
Ent Credit Union
Jon Paukovich, Chief Lending Officer, Ent Credit Union
Jon Paukovich has been with Ent Credit Union ($7.1B, Colorado Springs, CO) for 16 years, the past four as chief lending officer. During the Great Recession, he was theColorado cooperative’s vice president of mortgage lending.
Looking back at the Great Recession, what are you and your lending operation doing differently this time and why?
Jon Paukovich: COVID-19 has been a unique circumstance and appeared very quickly. Even before the government came out with the CARES Act, we started engaging our members to offer assistance. We offered loan deferments and skip-a-pay options.We stopped repossessions and foreclosures. We also suspended fees for three months.
Since we’ve previously had to deal with prior natural disasters, we immediately reinstituted an emergency loan program to get cash in our members’ hands. This was available to members almost immediately and we streamlined the process to minimizefriction.
We ended up doing approximately $45 million in emergency loans. These are unsecured loans, and we realized we would have higher losses than normal, but we all know the situation was critical.
What are you doing the same and why?
JP: We didn’t make many changes to our lending process or guidelines. We did the same thing during the Great Recession. During the Great Recession, there were mortgage lenders going out of business daily. Many lenders were changingtheir guidelines constantly. We stayed consistent and didn’t make changes. We were able to save many transactions for our members that had fallen apart with other lenders. We reached out to the real estate community to let them know that.
It’s the same with COVID-19. We have stayed consistent. We’ve seen lenders adjust their guidelines to be more conservative or even get out of lines of business for a while. Some of our big bank competitors dropped out of home equity lendingand jumbo mortgages (or made it extremely difficult to apply such as requiring a significant deposit relationship). We continue to be very active in home equity lending and have not adjusted our jumbo mortgage guidelines.
This recession also has been different due to the fact that home prices are still very strong due to low inventory and interest rates. Used car values have been exceptionally strong which has resulted in repo recoveries closer to 60% rather than 40% duringthe Great Recession.
Bonus question: How does the current recession in your community compare to the last one?
JP: Tourism is a big job generator in our area and that certainly has been hit. Real estate prices are exceptionally strong due to an influx of people moving to Colorado from larger urban areas who are able to work remotely. Still tobe determined is how our large ski industry will be impacted by COVID restrictions.
Lake Trust Credit Union
Andrea Mosher, Vice President of Lending, Lake Trust Credit Union
Andrea Mosher has been vice president of lending at Lake Trust Credit Union ($2.2B, Brighton, MI) since 2015. During the Great Recession, she was vice presidentof lending at University of Michigan Credit Union.
Looking back at the Great Recession, what are you and your lending operation doing differently this time and why?
Andrea Mosher: This recession is very different than the Great Recession. Consumer behavior is different and there really is no historical trend data to predict where we might be going. We are definitely more engaged in helping membersand member businesses make it through to the other side with far more options including deferrals of payments, modification of terms, and processing and funding of government programs such as PPP (Payroll Protection Program).
I also think we’re using the dialogue we’re having today to better shape how we address and help our communities going forward outside of just providing financial products.
What are you doing the same and why?
AM: We’re going to listen to our members and try to help them identify all their options. We need to make sure that people are not taking advantage of the options available just because they can, but really understand what’sin their best interest for the long term.
Bonus question: How does the current recession in your community compare to the last one?
AM: Unemployment is being created by many different catalysts in 2020 that tend to snowball. For instance, there are many that are not working today that have the desire, capability, and opportunity to work but can’t because childrencan’t go back to school.
There are jobs available but circumstances are keeping the workforce at home. During the former recession, there was a desire but not an opportunity in many cases.
We also saw consumer assets (homes, etc.) decrease in value so people walked away and started over. Today, homes are increasing in value and people are buying new cars. Previously, large purchases transactions came to a halt.
Oregon Community Credit Union
Russ Bernardo, Chief Lending Officer, Oregon Community Credit Union
Russ Bernardo joined Oregon Community Credit Union ($2.3B, Eugene, OR) as chief lending officer in 2018 after nearly 10 years at Northwest Community CreditUnion. During the Great Recession, he was that cooperative’s real estate lending manager.
Looking back at the Great Recession, what are you and your lending operation doing differently this time and why?
Russ Bernardo: The difference this time around is the core health and stability of financial institutions which is allowing us to be a remedy for helping people, rather than the root cause of the problem.
Using lessons learned from the past, we’re shoring up our loss reserves, like many other institutions are no doubt doing as well, and we’re looking for opportunities to go above and beyond and really help members meet their needs during thischallenging time.
One example: OCCU set a goal early in 2020, even before COVID hit, of providing up to $1 million in Member Impact loans. These are loan opportunities that traditionally wouldn’t check the normal boxes to meet our guidelines, but stillmake good, common sense based on additional parameters that don’t only align with credit scores, debt ratios, or loan-to-value percentages.
Another: When COVID did hit, we made outbound calls to members and member businesses that we knew were likely going to be affected or already had been touched by COVID and the related shutdowns. In many cases, we were able to establish a line of communicationearly with these members that allowed us to guide them through their challenges.
What are you doing the same and why?
RB: Even with many of our lenders working remotely, we’re still focusing our talent and effort on providing the same great service we would provide our members any other day. OCCU’s vision is to Enrich Lives.And that means that regardless of the challenges that our members and communities are facing, we’re going to work each day to ensure we’re providing as much value as we can.
Bonus question: How does the current recession in your community compare to the last one?
RB: The two situations are very different. The Great Recession ultimately was caused by a systemic breakdown in the American housing and financial sectors, which ultimately caused lenders to limit access to credit and offers of forbearancerelief to consumers during a time of need.
But that’s not the case today. Credit unions across the country are stepping up and not only continuing to make loans to members, as evidenced by record mortgage activity in 2020, but we’re also helping members adversely affected during thistime of need with skip pays, emergency loans and payday alternative products, just to name a few.
In addition, credit unions have banded together with our local credit union leagues to provide advice to our legislators to help guide common-sense COVID relief and help members stay in their homes and keep their cars.
Suncoast Credit Union
Vicki Lovett, Chief Lending Officer, Suncoast Credit Union
Vicki Lovett has been with Suncoast Credit Union ($12.0B, Tampa, FL) for 39 years, the past 12 as chief lending officer at what is now the nation’s largestlow-income designated credit union (LICU).
Looking back at the Great Recession, what are you and your lending operation doing differently this time and why?
Vickie Lovett: There were a lot of learnings from the Great Recession. One of them was that restricting our lending guidelines significantly isn’t always the right answer. Even in an economic downturn, members still need to borrow.
Today, we’re continuing to lend to our members using only minimally adjusted underwriting guidelines. We know first-hand the best way to recover from a recession is to lend our way out. We’re doing exactly that this time.
During the Great Recession, another big realization was we needed to greatly enhance our reporting and access to data. Since then, we’ve focused on enhancing our capabilities in this area. We can always get better, and for us, this is an iterativeprocess that continues to mature.
What are you doing the same and why?
VL: We’re focusing on helping members who are negatively impacted, and we will continue to do so. During the Great Recession, we formed a specialized group to work with members in need of more in-depth assistance to successfullyrecover from the hardship they were experiencing.
As things got better, this group was absorbed into our Member Solutions area. Now, in 2020 we have re-convened a similar group to focus on assisting members as new needs arise.
Bonus question: How does the current recession in your community compare to the last one?
VL: The biggest difference we see is home values. During the Great Recession, we were one of the epicenters of the real estate downturn. This time around, home values seem to be stable to actually increasing. We’re hopeful thiswill help mitigate some of the financial difficulty members will be facing in the next 12-18 months.
Community First Credit Union of Florida
Susan Verbeck, Chief Lending Officer, Community First Credit Union of Florida
Susan Verbeck joined Community First Credit Union of Florida ($2.0B, Jacksonville, FL) as its chief lending officer in 2008 and hasbeen a senior credit union lending executive for 27 years.
Looking back at the Great Recession, what are you and your lending operation doing differently this time and why?
Susan Verbeck: I joined Community First in April 2008, right when the recession was heavily affecting consumers ability to pay. Being in a sand state, the primary focus quickly became rapidly declining real estate prices and consumerinability or unwillingness to pay for homes that were depreciating in value so quickly.
There were several changes we made during and following the recession that have shown benefits today while handling COVID. First, just as many others throughout the industry did, we experienced an unprecedented loss in residential real estate values duringthat period. That learning has resulted in more focus on property valuations and additional scrutiny when reviewing appraisals and comps.
The second valuable learning involved heavy lending to consumers for toys the third or fourth auto, the boat, the recreational vehicle, suddenly unaffordable items when faced with financial uncertainty. Since the recession we’veupdated our consideration of payment affordability with these requests.
What are you doing the same and why?
SV: As a result of lessons learned from the 20082010 recession, today’s pandemic has had a lesser impact on our members and on the credit union, and through lessons learned during the Great Recession we’ve successfullyserved and worked with our members to ensure the outcomes are much more positive than last time.
Bonus question: How does the current recession in your community compare to the last one?
SV: Real estate valuation this time has remained strong and the overall market is seeing a high demand for home purchases. Repossessions have not increased and auto values are currently at higher levels than before COVID.
Unemployment is decreasing, although will probably not return to pre-COVID levels until this time in 2021, but hiring is relatively strong in the market right now.
It seems lessons learned in 2008-2010 were taken to heart and not repeated in the past 10 years, by consumers or lenders. The economy here in Jacksonville has remained relatively strong and well positioned to work through this challenging time much betterthis time.
These interviews have been edited and condensed.
