Transcript Document

“Listening to the financial wisdom
and common sense in our
communities.”
16th Border Legislative Conference
Edward Speed
TDECU – Your Credit Union
Lake Jackson, Texas
This is the presentation
that I give to my peers
in credit unions and
banks to try to get them
to understand the
incredible business
opportunities in the
border states.
To be successful never forget
• People of low to moderate income are:
•Intelligent
•Appropriately skeptical
•Street-smart
•Wise
•Survivors
•Insightful
•Hardworking
•Loyal to those
demonstrate honesty and
show respect
•Cautious
To be a successful lender
•
Understand the strength of Latino
household finances (multiple wageearners increase capacity)
• Understand the power of Latino
family aspirations for homeownership, self-sufficiency and
business ownership.
• (Cultural guarantee.)
• Entrepreneurial culture
People of low to moderate income:
Know far more about their needs,
desires, financial situation and
financial capacity than we will
ever know if we do not listen,
learn and remember.
To be a successful lender
•
Personalize the credit decision.
• Analysis of low credit scores
• Medical Indebtness
• Job stability
• Employment gaps
• Search for non-traditional credit histories
To be a successful lender
get it thru your head that:
• Down payment is not a predictor of a
sound loan relationship. Let borrowers
keep savings!
THE OPPORTUNITY
This is not about charity or
subsidies or undue risk.
This is good business!
Hispanic-Americans
Projected Purchasing Power:
1998
2015
$380 billion
$One Trillion
Source: Standard & Poor’s DRI
Latinos Lead All Populations in the
Growth of Middle-Class Households
Growth of the Middle Class: 1987 to 2007
60%
54.1%
50%
40%
30%
20%
12.3%
10%
0%
Latino
All Other Groups
Minority Families Have More “Economic
Generators” Per Household
Households with Three or More Income Generators
52.5%
27.2%
25.6%
19.4%
U.S. Born
Latino
Foreign-Born
Latino
13.5%
14.0%
U.S. Born
White
Foreign-Born
White
AfricanAmerican
15.3%
U.S. Born
Asian
Foreign-Born
Asian
Primary Opportunity
Market Segments
----Access To Capital
Young Singles and Young
Latino Families
• Newlyweds
• Young Couples
• Families with Multiple wage earners
• Young Singles
• Young Entrepreneurs
• Start up businesses
In the Market For:
• Banking Services
• Automobile Loans
– Checking Accounts
• Home Mortgages
– Savings Accounts
• Credit Cards
• Money Transfers
• ATM Cards
• Small business loans (NOT SBA!)
Looking For:
• Sound Advice
• Accessibility of Facilities
• Ease of Transaction
• Non-exploitative Environment
• Building-block Attitude
• Cultural Nuances
Working Families – Moving Up From the
Paycheck to Paycheck Experience
• Blue-collar Family With Improving Job Prospects
• Growing Families With Busy, Active Lives
• Families Frustrated With Paying Rent and
Ready to Pool Multiple-worker Incomes to
Reap Benefits of Home or Business
Ownership
• Immigrant Families Whose Work Ethic Has
Generated Savings
• Extended Family Members Must Be Included in the
Household For Determining Financial Capacity
In the Market For:
• Banking Services
• Credit Cards
• Automobile Loans
• Education Loans
• Home Mortgages
• Micro Lending
• Insurance
• Small Business Loans
– Not SBA!
Looking For:
• Respectful Setting
• Business-like Attitudes
• Straight-forward Transaction • Bilingual Assistance
Immigrants - A Growing Market
Through 2010
Immigrants will
account for nearly 1/5
of total household
growth.
Immigrant
homeowners will
increase by more
than 50%.
Share of Total Household Growth
All Other
80%
Increase in Immigrant Homeowners
2,200,000
1,400,000
1980-1995
Source: Fannie Mae Foundation,
Immigrants
20%
1995-2010
Sizing the Opportunity:
Prevalence of Non-Traditional Lending
Nationally,
non-
Loan Volume ($ billions)
$200
traditional
lending
$150
$150
$160
$140
$125
grew
$96
at a
compound
$100
rate of 35%
from 1999 to
2005.
$50
$65
$35
$0
1999
2000
2001
2002
2003
2004
2005
The Non-Traditional Lending Market
Why have predatory payday lenders been so
successful?
• Credit unions have strayed from our roots
• Banks “cherry-pick” communities
• Conventional lenders (credit unions and banks)
have a limited presence in many under-served
areas
• You can’t serve a community if you’re not in the
community.
1Source:
Fannie Mae’s consumer survey
Benefits To Lenders
• Untapped markets still exist.
• The Hispanic market is growing and is eager for
homeownership and business loans.
• This is incremental business and more revenue.
• Competitive Advantage - You can provide valueadded services to your borrowers by introducing
them to flexible low cost loan products that you
offer – and gain life-long, loyal customers.
Hispanic Market
• The Hispanic market is large and growing.
• This population is very motivated to purchase a
home, open a business or expand a business.
• When people of low-to-moderate are made
aware of their options they can receive the
lowest cost financial services available.
CONCRETE OBJECTIVES
• Hispanics in border states are rapidly
building good credit histories using
payday loans and rent-to-own purchases.
BUT
Banks and Credit Unions Can’t See These
Excellent Creditors Because Payday
Lenders and Rent-To-Own Stores Do Not
Want to Let The Credit Records Of These
Excellent Borrowers Become Public
Information
An Ugly Truth
Payday lenders ARE REPORTING
“negative credit” but will not
report good credit histories.
CONCRETE OBJECTIVE #1
Best Solution
Require that non-traditional lenders
(Payday Lenders) and “Rent To Own”
stores be required to join national
credit bureaus and report the
payment histories of their customers
if they want to be in the lending
business in your state!
CONCRETE OBJECTIVE #1
Fallback Position
• If payday lenders and rent-to-own stores
will not report voluntarily to credit
bureaus they must at least be required to
respond to credit inquiries from regulated
financial institutions (banks and credit
unions) in a timely manner (same day)
when authorized by the borrower.
CONCRETE OBJECTIVE #2
• Find a way for non-debt recurring
payment histories, (utilities, cable, phone)
to be made available to lenders if
authorized by the borrower.
CONCRETE OBJECTIVE #3
• Recognize that the number one reason for
poor credit today is related to medical
expenses – not misuse of credit.
• Poor credit occurs when bad things
happen to good people, - - - - the Five
“Ds”:
• Death, Divorce, Downsizing, Destruction,
Disease
Hard Reality
• Predatory lending will thrive until credit
unions and banks offer attractive
alternative financial service and fulfill
their responsibilities to our communities.
What is TDECU doing now?
• Full time financial education staff free to schools
and community groups.
• Pay-differential increase for Spanish-speaking
staff.
• Opening “express branches” in lower income
communities to provide free check-cashing and
short-term loans at traditional interest rates.
• Cross-border, branching relationship with Caja
Popular Mexicana
• Free remittances to Mexico with fixed, no-profit
currency exchange
The Bottom Line For Bankers
The next “greatest generation” has already formed
and is rapidly growing in our border state Latino
communities.
•
•
•
•
•
•
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Entrepreneurial
These are the exact
Incredible work ethic
characteristics of the
Self-sufficient
Depression/WWII
Fiscally conservative
“greatest generation.”
Socially liberal
Family oriented
Community and church oriented
Patriotic
Fierce determination that their children will have
a better life.