Executive Summary International – 14 May 2008

By Christian Mullins

Canada

New Brunswick has instituted several rules changes to credit unions and caisse populaires in the hopes of avoiding another bailout like Caisse Populaire de Shippigan, which cost the provincial government $31 million last year. The key rule change states that if a credit union declares bankruptcy, member’s deposits are guaranteed to $250,000, bringing them in line with other Atlantic provinces. Previously, 100% of their deposits were insured.

Ghana

The Twifo-Heming-Lower Denkyira District Teachers Co-operative Credit Union (say that five times fast) reports that their bottom line is being affected by members who borrow funds then move to another region on study leave, failing to repay the loans. The Accountant-General’s Department compounds the issue by deleting member names that depart the region on study leave.

Ireland

Over the past four years, 149 credit unions purchased approximately €180 million in investment bonds that have since lost about 40% of their value. An agreement reached through the stockbroking firm Davy will allow the credit unions to recover about €35 million, the value of losses on investments sold through the firm, over a ten year period.

Several companies offering Rent-to-Buy homes are being met with skepticism.  It’s a ‘try before you buy’ system, which allows the prospective owner to rent the home at above market prices, with some of that money going to a deposit on the home.  The homeowner/landlord sets a price for the future sale of the home, and the renter has the choice to buy or move out.  Rent-to-Buy is seen as an acceptable market tool provided the value of the home increases or remains steady.

Executive Summary – 14 May 2008

By Christian Mullins

Executive Summary:

Mixed news in the mortgage market Tuesday. Real estate data firm RealityTrac reported that April foreclosures were up 65% over the previous year, and up 4% from March, with a total of 243,353 filings. On the positive side, mortgage applications are up for the second consecutive week, largely benefiting from lower national rates on fixed 30 year loans, which dipped to 5.82% (6.13% this week last year).

Later this summer, the Federal Trade Commission will hold a Town Hall meeting to discuss consumer protection issues regarding contactless payment systems. While the number of contactless purchases is expected to exceed 24 million in 2008, there was a report released in December showing that the encryption could be cracked with $1,000 worth of equipment, causing some consumer backlash, particularly in Boston, where the story was reported in detail.

The House of Representative Judiciary Committee is scheduled to hear testimony on The Credit Card Fair Fee Act, under which interchange rates and terms would be determined by a panel of Electronic Payment System Judges. CUNA has stated they plan to oppose the bill, stating their support for a free market system. Articles with a more thorough pro and con viewpoint are available.

Even though the Federal Reserve has cut interest rates from 5.25% to 2.00% since mid-September, Fed Chairman Ben Bernanke concedes that the credit crisis is not yet over. A primary concern now is that the market may continue to slump while rising energy costs will drive inflation pressures upward. Moving the rate either way could hurt the economy, as could a stabilization of the rate. In short, there are too many determining factors for a consensus projection.

Robbed:

• Fibre FCU, West Kelso, Washington, Tuesday. A man wearing a ski mask and toting a semiautomatic handgun lined up and pepper sprayed everyone in the credit union before leaving with an undisclosed amount of cash.

Arrested, Arraigned, Charged, or Sentenced:

• Police in Berkeley, California arrested four men in connection with the robbery of Cooperative Center FCU Tuesday. The four men robbed the CU using a takeover style and punching a female teller in the back of the head. Three of the men were caught with $6,000 and a cache of guns after police chased down their car. The fourth man was arrested outside an apartment complex later that afternoon.