NCUA will review the way it asks credit unions to track modified mortgages after some credit unions complained the current policy almost makes foreclosing the troubled loans the more practical option.
“NCUA supports credit union efforts to find creative solutions for members who need loan modifications to stay in their homes," said NCUA Board Chairman Debbie Matz. "As part of our efforts, the NCUA Board will be reviewing our current policy on Troubled Debt Restructuring in the near future. NCUA is seeking solutions that would better assist credit unions which are working diligently to provide members with alternatives to foreclosure. Of course, any solutions must be consistent with Generally Accepted Accounting Principles and NCUA’s mission to protect credit union safety and soundness.”
The agency has been requiring credit unions to track modified mortgages as delinquent loans for six months even if borrowers had been making their payments on time and keeping the modified loans current.
Credit unions have pointed out this both disadvantages the borrower with credit reporting agencies and makes the credit union appear as though it has more delinquent loans than it does. Further, since the modified loans forced to be carried as “delinquent” almost always have to be tracked manually, they take more staff time and resources than others which can be tracked with automated systems.
Credit unions have acknowledged that modified loans need to be tracked but have expressed hope the agency could find a more practical approach to the effort.