Edward Speed

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Listening to the financial wisdom and common
sense in our communities.
16th Border Legislative Conference
Edward Speed TDECU Your Credit Union Lake
Jackson, Texas
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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.
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To be successful never forget

• People of low to moderate income are

• Appropriately skeptical
• Wise
• Insightful
• Loyal to those demonstrate honesty and show
  respect

• Intelligent
• Street-smart
• Survivors
• Hardworking
• Cautious

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To be a successful lender

• Understand the strength of Latino household
  finances (multiple wage-earners increase
  capacity)
• Understand the power of Latino family aspirations
  for home-ownership, self-sufficiency and business
  ownership.
• (Cultural guarantee.)
• Entrepreneurial culture

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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.
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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

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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!

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THE OPPORTUNITY
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This is not about charity or subsidies or undue
risk.This is good business!
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Hispanic-Americans

• Projected Purchasing Power
• 1998 2015
• 380 billion One Trillion

Source Standard Poors DRI
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Latinos Lead All Populations in the Growth of
Middle-Class Households
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Minority Families Have More Economic Generators
Per Household
Households with Three or More Income Generators
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Primary OpportunityMarket Segments-----Access
To Capital
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Young Singles and Young Latino Families

• Newlyweds
• Young Couples
• Families with Multiple wage earners
• Young Singles
• Young Entrepreneurs
• Start up businesses

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In the Market For

• Banking Services
• Checking Accounts
• Savings Accounts
• Money Transfers
• ATM Cards

• Automobile Loans
• Home Mortgages
• Credit Cards
• Small business loans (NOT SBA!)

Looking For

• Sound Advice
• Ease of Transaction
• Building-block Attitude

• Accessibility of Facilities
• Non-exploitative Environment
• Cultural Nuances

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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

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In the Market For

• Banking Services
• Automobile Loans
• Home Mortgages
• Insurance

• Credit Cards
• Education Loans
• Micro Lending
• Small Business Loans
• Not SBA!

Looking For

• Respectful Setting
• Straight-forward Transaction

• Business-like Attitudes
• Bilingual Assistance

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Immigrants - A Growing MarketThrough 2010
Immigrants will account for nearly 1/5 of total
household growth.
Immigrant homeowners will increase by more than
50.
Source Fannie Mae Foundation,
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Sizing the OpportunityPrevalence of
Non-Traditional Lending
Nationally, non- traditional lending grew at a
compound rate of 35 from 1999 to 2005.
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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 cant serve a community if youre not in the
  community.

1Source Fannie Maes consumer survey
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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
  value-added services to your borrowers by
  introducing them to flexible low cost loan
  products that you offer and gain life-long,
  loyal customers.

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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.

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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 Cant 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

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An Ugly Truth

• Payday lenders ARE REPORTING negative credit
  but will not report good credit histories.

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CONCRETE OBJECTIVE 1Best 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!

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CONCRETE OBJECTIVE 1Fallback 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.

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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.

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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

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Hard Reality

• Predatory lending will thrive until credit unions
  and banks offer attractive alternative financial
  service and fulfill their responsibilities to our
  communities.

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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

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The Bottom Line For Bankers

• The next greatest generation has already
  formed and is rapidly growing in our border state
  Latino communities.
• Entrepreneurial
• Incredible work ethic
• Self-sufficient
• Fiscally conservative
• Socially liberal
• Family oriented
• Community and church oriented
• Patriotic
• Fierce determination that their children will
  have a better life.

These are the exact characteristics of the
Depression/WWII greatest generation.