By Jamie Strayer
As we all adjust to the widespread implications of COVID-19, better known as the coronavirus, credit unions are concerned about the financial impact from lost jobs, shuttered businesses and social distancing. How will borrowers be able to pay back their loans if they’re laid off or experience a reduction in hours?
Low-income credit unions and Community Development Financial Institutions are likely to feel the pinch particularly acutely, because members not only are low-income, but also primarily hourly wage earners who could have their hours reduced or eliminated.
But credit unions were founded to serve precisely these members during exactly these times – those who are working hard to scrape out a living or even get their lives back on track after personal or financial crisis. So, how do credit unions continue to safely and soundless serve consumers who’ve been hardest hit by the current crisis?
CU Strategic Planning has been successfully writing Treasury CDFI grants for a decade, and we’re currently working to help increase CDFI funding during the COVID-19 crisis. CDFIs are critical to many who are particularly likely to come in proximity of those who’ve contracted corona, whether first responders, healthcare workers or the elderly and the poor.
A Request for Funding
In response to the impact of COVID-19, CU Strategic Planning, along with CUNA, NAFCU, the Opportunity Finance Network and others, have independently written Congress, requesting additional funding for CDFI grants and the NCUA’s Community Development Revolving Loan Fund. In our request specifically, we requested immediate funding to:
- Increase from $262 million to $600 million for the April 21 grant funding program
- Add an Emergency Round of CDFI Funding of $500 million
- Boost the CDRLF by $5 million
CDFI funds will help our credit union family continue the amazing work they are accomplishing during this extraordinary time by allowing additional cushion for allowance for loan/lease losses. A single million-dollar grant can help a credit union fund short-term emergency loans, increase credit card limits or provide other useful programs that are so desperately needed right now.
The opportunity for an additional CDFI grant appropriation from Congress could come at any time as they deal with the crisis, so please be sure to contact your representatives to show your support for an increase and emergency funding round.
Redesigned Policies
Consistent with credit unions’ efforts to stand behind their members and help them weather the pandemic storm, all of our clients have redesigned policies, products and services to accommodate relief programs, such as:
- Allowing members to skip a payment
- Fee waivers on all access points
- Deferments for loan payments, initially for 90 days, and potentially for another 90 days (adding to the end of the loan period)
- Modifications for mortgage payments for mortgages held in portfolio
- Assisting members in applying for unemployment benefits, SNAP (food assistance) and/or unemployment insurance for loans
- Relief loans – no initial payments for 60 days/30days
- 12-month emergency loans
At the same time, CDFIs are beginning to see members, particularly older ones, withdraw large sums of cash, which can stifle lending in a liquidity crunch. And that’s on top of shrinking net interest margins as the Fed reduces rates in an effort to maintain the economy, negatively affecting net income.
Soldiering On
Despite the challenges, credit unions were built of, by and for their members. We must soldier on. Earning your low-income designation and CDFI certification provides access to greater opportunities for resources so your credit union can continue to provide outside-the-box products and services and be there for your most vulnerable members as we work through this global, human crisis.
Jamie Strayer is founder of CU Strategic Planning. For info: www.custrategicplanning.com.