Add Corporate Credit Unions To Those Taking Substantial Hits From Holdings In Mortgage-Related Securities

The Wall Street Journal reports:

• Five of the nation's largest credit unions are reporting big paper losses on mortgage-related securities, a sign that housing-market distress is spreading even to the most risk-averse financial sectors. [...] Credit unions are not-for-profit, member-owned cooperatives that take deposits and lend money like banks. The mortgage problems are focused on so-called corporate credit unions, which are key players in the industry.(1) They don't deal directly with consumers, but provide investment services and financing to regular credit unions, which do.(2)

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• Credit unions in general are among the most conservatively run financial institutions in the U.S. That some are showing strains indicates that almost no financial sector is immune from the mortgage meltdown that has caused widespread carnage among commercial banks and on Wall Street.

For more, see Mortgage-Market Trouble Reaches Big Credit Unions.

Thanks to Bill Collins of Crossroads Abstract, Rochester, NY for the heads-up on this story.

(1) According to the story, the five corporates showing big mortgage-related losses, according to federal regulatory filings, are U.S. Central Federal Credit Union; Western Corporate Federal Credit Union; Members United Corporate Federal Credit Union; Southwest Corporate Federal Credit Union; and Constitution Corporate Federal Credit Union. Together, they reported about $5.7 billion in "unrealized" losses as of the end of May, the filings indicate. Unrealized losses happen when the market value of a security falls, even if it hasn't been sold.
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(2) Reportedly, the troubles of the corporate credit unions appear to be having little impact on regular credit unions. Executives at several of the regular firms say they are closely monitoring the financial condition of the corporates, but that they remain confident and haven't reduced their funds on deposit with the corporates, according to the story.