Shadow Inventory and its Potential Affect on Future Real Estate Prices

Shadow Inventory is the amount of inventory that banks have on their books, but have not yet released to the market. Homes considered as Shadow Inventory could be homes near default or already in bank possession. Although the big bank representatives maintain that they are not purposely stockpiling this inventory, it has been speculated that banks are keeping these foreclosures from market to keep demand up for those homes already on the market. Regardless of intent, this surplus inventory could play a major role in determining future real estate prices.

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Troubled Debt Restructurings and Mortgage Modifications

So far I’ve tried to keep the titles of these posts eye-catching. Sorry for not coming through on this one. Trouble Debt Restructurings may not be exciting, but they have been a hot topic for some time now. I wanted to use the blog to answer some common questions surrounding TDRs.

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Eight Things You Should Be Including In Your Allowance Calculation, and Probably Aren’t

The NCUA recently held a webinar on the allowance calculation. Most of the information covered was basic, but a large part of the webinar was dedicated to the inclusion of qualitative factors in your calculation. The NCUA is expecting you to include and support these factors, but in a poll of the 2,100 attendees, about half in attendance said they are not including qualitative factors in their calculations and 25% of those are say they cannot support their factors.

The logic behind including qualitative factors is that your loan portfolio is different than it was during the period which you calculated historical charge offs, and this should be reflected in your allowance. They gave eight examples of qualitative adjustments. There doesn’t need to be an adjustment for all eight, but you should consider them. I have elaborated on the the items that seemed more significant to the NCUA They include:

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The Lost Decade – The Continued Decline of U.S. Home Prices

Calling the trend in U.S. Home Prices a “Double Dip” implies that there was once a recovery. Although it doesn’t have quite the same ring to it, I think “Continued Decline” may be more appropriate in this circumstance.

According to data compiled by the National Association of Realtors, of the 158 major metropolitan areas evaluated, 148 saw declines averaging approximately 8.2%. The nine metropolitan areas which improved increased approximately 3.2% on average.

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Using Google Places as a Free Tool to Expand Your Marketing Reach

Google Places is the map that comes up when someone types “Lending Near [Insert Geographic Area Here]” into Google. There are pins in the map indicating locations that fit your search criteria that you can click on to obtain more information about the business or go directly to the business’ website. This service is free, but does require you to register with Google Places. You may already be registered with Google Places, but if you aren’t, it is a great tool in reaching out to potential members in your area.

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A Loan Guy’s Take on the State of the Credit Union Industry

I sat down with a copy of the NCUA’s State of the Credit Union Industry report and decided I wanted to look at some past trends. I opened up an Excel Spreadsheet and the past five years of reports (December 2006 to December 2010) and started making some calculations. Below are some things that caught my attention about where the credit union industry is now and where it is headed:

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Using Pivot Tables in Excel to Quickly Summarize Information

Excel is a necessity in this industry as credit unions aim to compile a wealth of information about tens of  thousands of members in a flexible format. Compiling this information is a challenge on its own, but then we have to find a solution to analyze it. Because we know you value the ability to generate reports that may not be defined in a software model, delivery of Twenty Twenty’s risk model utilizes Pivot Tables to analyze your data. I wanted to provide a quick and easy Pivot Table tutorial so you can start using this tool to make your life easier.

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New FASB Disclosure Requirement

I want to bring to your attention a new FASB Update titled “Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses” that will be effective for most credit unions’ December 31, 2011 year ends. In case you haven’t been able to read the 92 page update, which can be found here, I’ve taken the liberty of compiling some key items that might interest you.

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The Benefits and Risks of Indirect Lending

According to an NCUA poll, approximately 84% of credit unions are involved in some sort of indirect lending. Another 8% are considering becoming involved. Indirect lending can expand your lending opportunities and give you a way to create member growth by reaching out to those individuals obtaining indirect loans who may reside in your credit union’s community. It can be a win-win situation for both you and the auto dealer or third party involved.

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Welcome to the Twenty Twenty Analytics Blog!

I would like to personally welcome you to the Twenty Twenty Analytics Blog. The purpose of our blog is to stay up to date on credit union standards, regulations and hot topics to provide you with the information you need to know to stay current. I would encourage you to click here to subscribe to the blog to receive updates when new information is posted. Subscribing will not opt you in to receive any promotional material from our website.

Have a question? Have you come across information that you would like to know more about? Email me! Your question may be the topic of our next blog.

Thanks for reading!

-Dan Price, CPA

Twenty Twenty Analytics Blogger