West Coast Credit Unions Are Still Modifying Loans, Despite Losses
Dave Roughton, executive vice president at the $1.4 billion SAFE Credit Union, said his Sacramento-area community credit union "continues to work with members in any way we can."
Roughton said SAFE has modified 140 first-mortgage and home equity loans in the last year for a total of $15 million and will continue on that pace this year.
"We're willing to make some pretty significant modifications in their loan structure if they truly have the desire to repay and stay in the home," he said.
Expenses associated with the NCUA's Corporate Stabilization Plan have forced SAFE to make some cutbacks, forcing the credit union to turn down opportunities to open a new branch or launch a new product. SAFE is also trimming operating expenses, including sacrificing "depth of employee-benefit packages."
But loan modifications haven't suffered, he said, because SAFE works out deals with members that ultimately protect assets, extending terms and reducing interest rates instead of writing off principal.
"Our lending group has been very creative in finding ways for members to continue to be responsible for the mortgage, putting them on a responsible payment plan they can afford and continuing to work with them over a five-year time frame so they can work out the loan," he said.
The $1.7 billion Redwood Credit Union reported it has already modified 54 home loans this year, and will continue to work with members despite having to pay its share to cover corporate losses.
While the Santa Rosa, Calif.-based credit union will modify both consumer and real estate loans, members are also strongly encouraged to receive financial planning education, develop a household budget, actively seek employment and make use of co-signers, said Executive Vice President Anne Benjamin.
"Redwood Credit Union is committed to continuing to work with our members and communities to find solutions, and at the same time, we will continue to ensure a safe and sound institution that is operating responsibly and in the best interest of the entire cooperative," she said.
Marisa Whitesides, vice president of risk management at the $547 million Greater Nevada Credit Union, related a similar story. Nevada has been hit hard with unemployment, she said, particularly in some communities with high credit union market penetration.
GNCU members are required to meet with one of two staff credit counselors, who help members prepare realistic household budgets.
"There's no sense in cutting payments in half if that won't be enough," Whitesides said, adding that the one-on-one sessions also reveal potential problems with other creditors that affect modification decisions.
She stressed that it's still too early to quantify corporate-related losses, but GNCU is anticipating having to tighten its belt as a result. Still, loan modifications won't take a hit because "for many members, either we do [modifications], or they can't pay. It's that simple."
Some enterprising members are trying to leverage the situation. Roughton said SAFE has received calls from members upside down in their mortgages who threaten to walk away from the home if they don't receive a principal write-down, which he said is "tough to deal with."
Ricki McManuis, senior vice president of corporate communication at the $958 million Altura Credit Union, said her Riverside, Calif.-located credit union must also separate those with real hardships from those who feel entitled.
"We had one member who applied for a mortgage modification, and while talking with her about her hardship, we discovered she was paying $600 a month to drive a brand-new Mercedes," McManuis said, laughing. "Certainly, this member is the exception, rather than the rule, but it does illustrate that some people think they have a hardship when really all they need is a budget."
While the credit union insists that members downgrade to more modest wheels, McManuis said, Altura takes a holistic approach to working with members, making sure they have enough money after making loan payments to cover transportation to work and other reasonable household expenses.