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Is there merit in the Marine Credit Union idea?

This blog doesn’t get any better than when it generates comments containing new and interesting ideas from readers. Such was the case last Thursday (Oct. 16.)

If you missed it, I blogged about banks lowering credit card limits. The reader comments were pointed and worth reading. Go back to last Thursday’s Dealer Outlook if you haven’t read them.

But one of the comments, in particular, is fascinating and worthy of a follow-up blog. It came from yachtmoneyman@yahoo.com, a nine-year veteran of the recreational lending business. He suggested it’s time to form a Marine Industry Credit Union. “The traditional banking industry has been making a ton of money (from boats) for decade’s,” wrote yachtmoneyman, “and when the economy goes into hard times they pull back so far that even a guy with a great credit profile can’t buy his boat…”

Now I’m no expert on credit unions. But where I live, teachers have a credit union, firefighters have one — in fact, nationally there are more than 9,500 federally insured credit unions reportedly serving 79 million members who deposit $520 billion. What’s more, credit union loans are over $355 billion. So, if credit unions work for teachers and firemen, why not boat industry associations, dealers and boaters?

Credit unions aren’t new. The first one was formed in Manchester, N.H. in 1909. But in 1934, President Roosevelt signed the Federal Credit Union Act authorizing formation of federally chartered credit unions in all states. The purpose was to make credit available and promote thrift through a national system of nonprofit, cooperative credit unions. Ah, “credit” and “thrift” – sure sounds good today!

Credit unions differ from banks in that they are organized to serve people in a particular community, group, or members of an organization or association. All the members have accounts and they own the institution. They elect their board of directors in a democratic one person-one vote system regardless of the amount of money invested in the credit union. Interest rates and other matters are set by this volunteer Board. They offer many of the same financial services as banks. Only a member may deposit money with the credit union or borrow from it. In practice, credit unions frequently provide a broader range of loan and savings products at a cheaper cost to their members than do banks.

At the risk of oversimplification, the idea of forming state-chartered, federally insured credit unions in the marine industry may have real merit given the recent abandonment by banks that have just discovered giving a loan to anyone with a pulse isn’t a good business plan! Is this the time for our marine trade associations, for example, to examine credit union formations?

The yachtmoneyman@yahoo.com indicates he is moving in that direction and has offered to talk to anyone interested. I’d take him up on it!

Comments

14 comments on “Is there merit in the Marine Credit Union idea?

  1. Jim Sabia

    I think marine credit unions would be a great thing. GE keeps raising floor costs, now they charge a munufacturer 1% up front if a dealer floors a boat. We need a reliable source for retail financing too. Being in this business 22+ years, I’ve seen too many finance companies come and go. Stability is essencial. How do we get started? Count me in! Jim Sabia – Top Notch Marine.com

  2. Randall Burg

    A Boaters Credit Union is the right solution for funding boats in todays economic environment. Traditional banks are walking away for the majority of very qualified boat buyers. I rencetly was told about a bank that walked form a $200,000 loan where the buyer had a high FICA and was putting down 50%!!

    How can the boationg business survive when banks are unwilling to find all but the top 1% of buyers??

    The answer is a bankk funded by boaters and with the knowledge and understanding of boats, boat buyers and ther boating industry.

    Where do I sign up?? I’ll glady move my funds out of Wells Fargo, which no longer does boat loans, and into a boaters credit union!!

    Randall Burg

  3. Colin

    This may be a good soloution, I know I have several friends that belong to an electrcians Credit union and not only do they like it for bussiness loans but it also allows their employees to join giving them access to low cost home loans. On the horror story side my father who works in a large New England bank recently saw their lending dept deny a loan for 275,000 with 150,000 down a new home because the buyer had a couple of small credit problems (nothing serious just late credit card payments)

  4. Bob Delaney

    The reason why you don’t see Credit Unions stepping up to assist the Marine Industry is because the banking industry’s strong lobbiest group have convinced Congress to limit the amount of overall business loans that Credit Unions can make to roughly 12% of their overall capital. The Credit Unions are further hampered in that the only way they can raise capital is through earnings. They can’t sell stock like a bank. Until Congress takes the hand cuffs off the Credit Unions they can’t help, and that won’t happen because the banks won’t let it.

  5. yachtmoneyman

    Bob – Yes it is true that the traditional banks don’t like CU’s. It is true that they are lobbying congress. But they are lobbying to get CU’s to pay more taxes. At issue is the credit unions tax-exempt status. Becuase CU’s are “not for profit” they are exempt from paying income tax. CU’s pay sales and property tax just like everyone else. What it comes down to it is the big traditional banks don’t want to share the pie. If I was a CEO of a large bank paying myself $10M per year I would not want someone’s hand in my pie.

    In regards to your comment about congress limitting CU’s to only lend roughly 12% of their over capital that is not correct. Here’s a great TRUE FACT about a regional credit union that was started for employees that work in the telecomunication industry. WESCOM credit union has $3,787,996,389.00 in assets and $3,142,531,600.00 in loans. That is over 82% loan to asset ratio. I could go on and on with these examples, Bob.

  6. Arch

    Randall, your scenario wasn’t that uncommon last year when the banks were buying strong. It takes more than a good credit score and strong down payment to qualify for a $200,000 loan. Strong tax returns, good debt to income ratio, comparable credit, etc. etc.
    If the buyer had all of that, he would have been approved then or now.
    And your comment that they are only buying the top 1% is absolutely incorrect.
    The banks are still buying loans , they are just tighter this year, and they should be. If people want a CREDIT UNION just so that they can buy deals that Bank of America, Bank of the West, US Bank, and BB&T won’t buy, then they are wanting it for the wrong reason. If the credit union wants to stay in business, they won’t buy the deal either. Those banks know how to underwrite boat loans. There is a reason they are still around and the others are gone.
    If you ask most boat dealers, the banks were too conservative last year and the year before, yet most of the banks are not making enough money doing boat loans to keep those marine lending departments open. Many were hit with FRAUD this past year too. The combination of low profitability, fraud, and lack of capital drove these guys out.

    JIM SABIA, please explain to us how so many banks have left this industry. I’ve been it for 20 years and it’s been VERY STABLE up until this year. ANd also explain to me how stability is essential? If you are a reputable and fairly healthy dealership, up until a few months ago, you’ve had COUNTLESS marine lenders you can sign up with any time you wanted. Most dealers have a 3 to 6 sources. In the past, IF a lender got out, IF YOU ARE DOING YOUR JOB, you have other lenders and there were always more to sign up with anytime you wanted. What you said makes little sense, unless you are talking about floor plan sources, which is NOT what this article is about.

    Everyone is so quick to jump on any new idea, thinking it will save our industry. I suggest you bloggers check with some industry experts before you make these kinds of assumptions, many of which are way off base. I’ve been in the industry twice as long as YACHTMONEYMAN and if he is saying he can’t get deals bought, then he doesn’t have the right sources, period.
    That’s not to say the idea of a FCU doesn’t have merit, but his comments about people with great credit not being able to get boat loans is bogus.

  7. Diana

    I think if I had access to our own marine industry credit union I would transfer my companies business accounts and my families accounts from my big bank that I’m just an account number to them to a marine industry credit union. Why not? These big banks do nothing for me but take my money. I would rather support our own industry than make the banks even richer. Every other industry has a credit union, why not ours?

    Kudo’s to you yachtmoneyman. I’ll be sending you an email for my support.

  8. Milburn Drysdale

    The time has come for someone to step in and make a change. The banks only want to be in this when times are good or when they feel the need to make a fast buck. Most of the dealers across the United States right now are lucky they make it though the year. With Key Bank getting out of the Marine side of business spells double trouble for dealers. Wholesale and Retail GONE!! Good luck trying to find GE or Textron out there buying up that inventory.. What makes matters worse is that they have no retail to help them move the inventory on the retail side. Wait until the bill comes in 90 days to payoff the flooring!!!!

    The time has come to have a Credit Union to be there in good times and bad. It needs to be for the Marine dealers ran by Marine people. Yachtmoney man is on the right track and we need to get behind him on this. There are too many good dealers and brokers out there that are feeling the pain. This can be done. If we can get big MfG’s to write checks out to start a campaign for Grow Boating (which what has that done for you???) Then we need to get them to back this…

  9. yachtmoneyman

    Arch, Arch, Arch – So you are saying the traditional banks are not looking at the asset (boat) and just looking at someone’s golden credit profile. Good for you Mr. Banker you just lost the deal to a credit union. How many CU’s have you seen in trouble or needed to be bailed out by the GOV. CU’s losses are still much lower than the traditional banks.

    A Marine Industry CU is run by the industry and will do everything that a traditional banks do(checking, savings, lines of credit, home loan, etc.). The direction of the Marine Industry CU will be controled by the elected marine industry board members and YES even you can be on the board (if elected).

    The fact is (NMBA) most of the repo’s and fraud deals are from the zero money down deals and the deals that are upside down in value. NOT FROM THE BIG DOWN PAYMENT DEALS.

    You sound like UW’s have extensive marine industry backgrounds. That’s not even near the truth. Most bank UW’s don’t understand the boat business. If a buyer does not fit inside the banks UW guidelines then they are declined. Yes there is some room to go outside the box but that is rare.

    Regarding my experience, yes I have nine years in the rec. loan business on both the bank side and the service side. I also have sixteen years in other segments of the marine industry. What does that mean to you? Don’t assume that a banker or a industry expert has all the answers. Maybe you and Bob can get a part time as lobbiest against a marine industry CU.

    The bottom line is a marine credit union is for everyone. It’s for the person that want’s to buy his/her first home but the bank said your credit profile is great but your in a business that’s to risky. It’s for the person that needs a line of credit or floor planning but the bank said NO your networth is to small. It’s for the person that feels like he is just an account number with his bank. It’s time to put this on the fast track. Myself and others are still looking for people to join our organizing committee. Email me if you have any interest. Thank to everyone for there positive support.

  10. arch

    MILBURN, right now, Bank of AMerica, Bank of the West, BB&T, US BANK, SunTrust, Provident, and others are still in the retail business and haven’t gone anywhere for decades. It’s completely false to state there are no marine lenders. YES, a half dozen of the most insignificant ones have gone away, but the main ones are still around and buying deals.
    KEY BANK hasn’t been relevent in retail marine financing in a few years. They have always had high rates and not real competitive. The floorplan situation is different. It is a problem and a dire situation for some deals. NOT RETAIL THOUGH.
    And we haven’t even mentioned all the finance companies (brokers) out there that have some other sources. TRIDENT, INTERCOASTAL, ESSEX, SEACOAST, SCOTT, STERLING, etc etc.

  11. Matt Temares

    Guys:
    All of your comments are somewhat correct, but not all of the comments are written with full lending industry knowledge. Could the industry benefit from a credit union? Of course, an additional lender and a lending source that understands the industry would always be good. Would many of you move your DDA accounts over (called share drafts in CU world) yes, I’m sure you would which would help increase assets which they could lend against. Will the CU be there for you in good times and bad? No, if they want to remain viable then they still have to adhere to responsible lending practices and they owe it to their members to stick to their credit policies. Will the CU be able to service all of your customers? Depends on the charter and the Field of Membership (FOM), just because a CU is created, doesn’t mean that every customer will qualify for membership or be able to obtain a loan.
    We provide the Loan Origination Solution (LOS) for some of the largest manufacturers financing programs in the recreational space. Though we currently do more in the powersports and RV market than marine, the dealer network in all of the industries are feeling the same pain. Our core lenders that have paid for the LOS that gets installed in the dealerships have all contracted a bit. Not because marine, motorcycle and RV loans are worse than other forms of lending, but rather they were leveraged too much and when they took losses in other verticals, they want to prevent loses in what have been traditionally their stronger businesses. In fact, the RV and Marine verticals have performed better than their regular consumer loan portfolios with regards to charge offs and delinquencies. Banks still making loans, but they are more selective. This of course hurts sales. So, is there and advantage to a CU, of course, but one source is not going to solve your problem. What each dealer needs is a number of sources for loans. This will be the community banks and CU’s that cater to the dealer’s geographic area, picture lending 50 years ago. The problem with this is that each lender will have different lending criteria and associated paperwork. Also, these smaller institutions don’t have the technology offerings to do instant credit approval, documentation and insurance which could take a couple of days. In this market, you want to sell them while you have them in front of you. The ironic part is that we have the solution, and have been offering to the big guys, quite successfully, but not to the smaller banks because the manufacturers we have are large national players and have wanted one lending source. So while a dealer might have had a local bank that they worked with, the manufacturers programs are only run through one bank. In the future manufacturers are going to have to help support the dealer base by setting up a relationship with more than one lender so that promotional programs can be utilized across a broader lender base. We are willing to do this even with the larger national lenders we have, but the manufacturers have to want it. In addition we could all benefit all in the industry if we put an association of small lenders in the industry together to act as one large entity. Have a central loan clearing house, and lender will take the paper they are comfortable with . This of course will take systems and technology, but it can be done, we are 80% there already. Willing to do my part to help, I can be reached at matthew.temares@metavante.com if you want to pick my brain or share your experiences or thoughs.
    Matt

  12. arch

    YACHTMONEY, first of all, where did I say that a CREDIT UNION was a bad idea? I love credit unions, am a member of a C.U. and have found them to be better than banks for what I’ve used them for.
    My post was simply to correct INACCURATE statements made by you and others.

    Marine lenders ALWAYS look at the buyer and the collateral.
    You’ve made another false statement. Any marine lender will tell you that most FRAUD deals are not ZERO DOWN. Most fraud deals are larger loans and lender require 10-20 % down on those. You obviously agree with me that most repo deals come from low or no down. What is your point?
    All I said regarding higher down payment deals is that somebody with good credit putting 50% down shouldn’t automatically be approved for a loan. There are other factors and I laid them out.
    Think about it. IF THAT DEAL WAS SUCH A GREAT DEAL, WHY DIDN”T ANY OF THE MARINE LENDERS OUT THERE RIGHT NOW APPROVE IT? You don’t think they are in it to make money? If the risk factor was in their favor, and it was a legitimately strong deal, they would buy it.
    They have hundreds of years combined experience and tens of thousands of deals that have help them mold their underwriting guidelines, and you think they are wrong? I would agree that occassionally, marine lenders decline what I would think are GOOD DEALS, but 95% of the time they are on the money. They have the expertise and stockholders to protect.
    A marine lender would rather have a STRONG applicant putting 15% down than a mediocre applicant putting 50% down. It’s been that way for decades and the stats are on their side.

    The marine lenders that are out there know what they are doing. They do not need to know the marine industry, they just need to be experts in marine lending, and they are. They are headed up and managed by people that have been specializing in marine lending for DECADES. Whether it’s BOA, BOW, USBANK, BB&T, SUNTRUST, PROVIDENT, etc etc. they know what they are doing and have guidelines in place, guidelines that their experience shows to be in the best interest of their bank and our marine industry. Like I said before, their conservative ways do cost a legitimate deal every now and then, but they also save us more than they cost us. It is their conservative nature that keeps our industry from doing what has happened to the real estate industry.
    So you are proposing a marine industry credit union just so we can get those once a month 50% down payment deals approved?
    Your experience in the marine lending industry means nothing to me. Why should it? I’ve been in marine lending longer than you. SOUND JUDGEMENT and GOOD IDEAS mean everything to me, whether it’s from a person in it 3 years or 30 years.
    Again, I”m all for a CREDIT UNION, and I’m sure it will be very beneficial on the wholesale (floorplan) side, but not so much on the retail (marine lending) side.
    No disrespect intended, but I laugh reading your last paragraph. You sound like a democratic congressman. Listen, banking is not supposed to be fair for everybody, or benefit everybody. Banking is a HIGH RISK business. If the person doesn’t have the comparable credit, then they are higher risk and therefore might be declined. Ditto for the dealership that doesn’t have the networth to offset the banks risk in giving him a 5 million dollar floorplan on depreciating assets.
    Your comments and ideas are EXACTLY what kicked off Freddie and Fannie and why the real estate industry is in the mess they are in right now. THat is EXACTLY what our industry doesn’t need, somebody who wants to put aside TIME TESTED CONSERVATIVE UNDERWRITING GUIDELINES in order to get a boat over the curb!

    You know what the outcome of the real estate fiasco is? That we were wrong in trying to get everybody into a home. That we were wrong in overlooking sound and conservative underwriting guidelines.

    I think most anyone that’s been in this industry for 10-15yrs+ will tell you that there has been some great lenders over the years, but they never seen to hang around long. ANd that is true. I can give you several examples of banks that come into our industry, thinking the same exact thing that you do, that they can buy more agressively and put BOA, BOW and others out of business. In 100% of the cases, those banks don’t last. Why is that Mr. YachtMoneyMan? Take a stab at it? It’s because they buy the deals the current banks won’t buy, their losses go up, and BOOM, the banks pulls the rug out from under them due to losses and cancel their marine lending programs.

    Our industry is in trouble, but it has NOTHING to do with retail marine financing.

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