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Serving Low-Income Households

Credit Union :ASI
Assets :$300,700,000
Address :5508 Citrus Blvd. | Harahan, LA 70123

Details :

Key Credit Union Data:

  • Loan/share ratio: 68%
  • Yield on average loans: 7.2%
  • # members: 80,000
  • Avg. shares/member: $3,469
  • Avg. loan balance: $6,161
  • Membership growth in 2009: 7.5%

Background:

Between 60% and 70% of ASI’s members fall into the low income designation; that is, their incomes are less than 80% of the area median family income. ASI tracks this information through its MCIF system and through in-house surveys of its members. According to Sarah Taylor, Senior VP, about one in 10 members were unbanked before joining ASI.

ASI and its members are still recovering from the Katrina hurricane. Taylor states the credit union lost about 10,000 members after Katrina. While the credit union is once again growing its membership, there are still lots of members with post office boxes or out-of-state addresses, notes Taylor. While the credit union had a low-income designation pre-Katrina, many of its members are facing even harsher financial situations post-Katrina. Taylor states, “More than half of our products are targeted towards our low-income membership.”

Services Offered:

The credit union offers a suite of low-cost alternatives to predatory lenders including:

  • Stretch Plan – an open end line of credit from $200 to $500, with an interest rate of 12% APR and a weekly club fee of $4 that includes free travelers’ checks, discounted money orders and a loan discount on other loans
  • Credit Enhancement Plan – a “next step” product after the Stretch Plan with a line of credit up to $3,000, 15% APR, and a weekly club fee of $4 with similar benefits to the Stretch Plan program
  • Asset Builder Loan – another “step up” product that requires a monthly payment of $50 per $1,000 borrowed, where $15 of each payment is deposited into a restrictive savings account paying a premium rate.
  • Freedom Loan – a consolidation loan up to $2,500 to pay off outstanding payday loans and requires credit counseling
  • Yours to Own Loan – a low-cost alternative to rent-to-own stores that is a secured loan for the purchase of household products, appliances, electronics or furniture
  • Subprime Mortgage Refinance & Rescue Loan – to help those families in danger of losing their homes post-Katrina from subprime predatory lenders who took advantage of people who needed to rebuild and put them in high-cost adjustable rate mortgages (ARMs). The credit union received a CDFI grant of $1 million that serves as a loan loss reserve to offer 30-year fixed-rate mortgages at 6%. To date, about a dozen such refi mortgages have been made.
  • SAFE Mortgage Loan Program – to be launched shortly. Rental rates remain high post-Katrina and although many people can manage the higher rental payments, they don’t have enough money to save for a down payment for a home. Those renters with a record of on-time monthly rent payments that are equivalent to, or in excess of, the monthly mortgage payment and escrow for a home will be eligible for a SAFE mortgage. The program is designed to reinforce positive behavior. There is a four year adjustment rate period at the beginning of the loan and the rate will decline by ½ point each year if all payments are made timely. Thus, loan rates could decline up to a maximum of 2 points. Following the four year adjustment period, rates remain in tact for the remainder of the loan.
  • Citizenship Loans to help Vietnamese and Hispanic members achieve citizenship
  • Free ITIN processing site at two bilingual branches to help immigrants take their first steps toward citizenship
  • Individual Development Accounts (IDAs) – to help members save for a down payment for a home. Accounts receive a 4 to 1 match, with a maximum of $1,000 saved, resulting in a $5,000 down payment.
  • Volunteer Income Tax Assistance (VITA) – for income qualifying members
  • Free Credit Counseling and HUD-Certified Home Buyer Education – through the credit union’s nonprofit affiliate, A Shared Initiative, Inc.
  • A Web-based Micro-Loan Pilot – for small business owners and a grant program for disadvantaged small businesses

Marketing Strategy:

The credit union works with a number of community partners to help with its outreach strategies. For example, social service and housing agencies refer people to ASI so the credit union can help with loans for down payments to get into rental units. With a history of on-time payments, these members become candidates for other loans, including mortgage loans.

Additional Information:

The Stretch Plan is considered to be the credit union’s “first-tier” product to help new members with credit blemishes begin a successful relationship with the credit union, according to Taylor. Once the member has successfully demonstrated a solid repayment history, he/she can move into other “next step” products which help bridge the gap between the Stretch Plan and a conventional, lower-APR line of credit. “It is ultimately our long-term goal to convert each Stretch Plan into a regular LOC, assuming the member has a need for some type of ongoing security net,” states Taylor.

The ultimate goal for many members is home ownership and ASI has put together programs to help many achieve that dream, from IDAs, to rescue refis and its new SAFE mortgage program. Katrina presented huge challenges to the people of New Orleans and to ASI. The credit union is responding to those challenges, including participation in a loan and grant program for disadvantaged small business owners that has deployed $15 million to metro area businesses to date.