CDFI faces hard times.

The recession has had a particularly crippling effect on some community development credit unions. One such CDFI, the Moffat, Colo.-based Saguache County Credit Union, is working with regulators and trade organizations to get back on track.

SCCU serves a rural, low-income area in south-central Colorado that lacked a financial institution until it was chartered in 1996. It has been driven to the brink by hard-pressed members deeding their homes, which have declined in value by as much as 40%, back to the credit union in order to seek employment elsewhere, CEO Richard Wertz explained.

Two months ago, the Colorado Division of Financial Services issued the credit union a cease and desist order, citing its "unsafe and unsound practices" and violation of "statutes, regulations and directives of the Division" and requiring it to develop a capital restoration and continuing profitability plan in order to keep operating.

Wertz said his credit union is working with federal and state regulators and the Credit Union Association of Colorado to find long-term solutions to its problems. He added that the CU had been doing so before the cease and desist was issued. SCCU is also developing a cooperation and collaboration plan with other San Luis Valley credit unions and CUAC to find ways to strengthen all the credit unions in the area, Wertz said.

Additionally, SCCU has a partnership with the National Federation of Community Development Credit Unions, which has helped the credit union with secondary capital, nonmember deposits, AmeriCorps Vista volunteers, individual development account programs, grants, advice and counseling, Wertz said.

The credit union is "actively looking at all options to protect our members' services and deposits," including branch closures and mergers, but it has not yet made any decisions, Wertz said. He added that SCCU has kept its regulators abreast of the changes it has made or is contemplating.

SCCU has seen stabilization in some areas; Wertz said the credit union's mortgage loans-to-asset ratio is down about three percentage points. It has reduced its delinquencies by 2% and its operating-expense-to-asset ratio is down by two percentage points. However, Wertz said, the credit union is facing the possibility that two longtime members who recently left the area to find jobs will no longer be able to make their mortgage payments.