It takes a village. We're all in it together, they say. Ofcourse this is true. Anyone who lives in a tight-knit communitywith good neighbors would attest to this sentiment, especially ifyou own your home and feel invested in the area.

A close and interdependent community can lift itself up and makethe whole neighborhood stronger. A house with a new roof andwell-cared for yard could inspire others to follow suit and investin home improvement, thereby elevating property values.

The same is true when you are blessed with neighbors who takegood care of their household finance. When a community has morehomeowners who are not overexposed to market risks and otherfinancial turbulence, the chance of a potential real estate “firesale” dramatically decreases, leaving the market value – andhousehold wealth – of the entire neighborhood intact.

But what happens when a community – or a credit union –increasingly finds itself with members who are more risk-prone andcould tip the scale of risk exposure for the entire group? Often itdoesn't take much. Just a few outliers of mortgage defaults orforeclosures can impact the financial stability of a community nomatter how good or strong it is.

This is when educating your fellow credit union members andneighbors could pay long-term dividends for everyone's – includingyour own – financial health. Interest rates have been athistorically low levels for more than two years now. Home prices –and home value for owners who want to tap into their rising homeequity – have been at a record high for many top markets in thenation. While this is a great climate for homeownership, it is alsoa landmine for homeowners and buyers to potentially overleveragethemselves, and expose not only their own household but the wholecommunity to increased financial risks. Just look back a decade tothe 2008 housing crisis: More than half of the U.S. was affected,more than 10 million families lost their homes and not all of thoseaffected were high-risk subprime borrowers. A bigpart of educating our fellow neighbors and credit union mortgageborrowers is to inform them on how to perform their personalhomeownership financial stress test. Such a stress test may includeasking yourself the following questions:

1. How much market value decline can I weather beforehaving an upside down mortgage and essentially losing my entiredown payment investment or more?

If just a 5% housing market correction in your area could exposea neighbor to losing a substantial amount of home equity, then theycould be overexposed to market risks. A 5% market fluctuation isnot uncommon in any market in a five-year cycle.

2. How long am I committed to living in this community,compared to the typical length of the market cycle?

Most homebuyers and investors prefer less transient communitiesbecause when homes in a community change hands less frequently,property values tend to be less exposed to aforementioned firesales that bring everyone's home value down. A look back at therecent year-to-year trending of a market could offer a good idea ofhow slow or quickly a market tends to recover from a temporarydownturn. Homebuyers who stay in the community for at least twocycles of downturn and recovery help reinforce the health andstability of the local housing market.

3. Do I have an exit plan if I need to sell under stressor unforeseen circumstances – maybe for a job loss, or even forsomething positive like a job relocation or surprise arrival oftwins?

Homebuyers often say they plan to live in a home for seven ormore years, but the reality is, in today's mobile world,increasingly few people do. The fewer surprises there are amongyour neighbors, and the more exit planning they have for theirhome, the lower the chance their home sale could negatively affectthe value of yours.

The last question is of particular importance. One thing youcould do to help your community is to spread the word on the meritsof having a sound exit plan. All homeowners should have one,especially in today's nomadic world of unpredictable housingmarkets. With an exit plan that covers a homeowner's loss even ifyou sell your home for less than what you paid for in a downmarket, short sales and foreclosures will become less and lessprevalent in your community. Credit unions will stay strong withoutthe burden of defaults and foreclosed properties.

When members of your credit union don't take a financial hit forpursuing a job opportunity or trading up to a bigger home toaccommodate a growing family, and when they get a check within 30days to reimburse their home sale loss in the tens of thousands ormore, the financial health of the entire community can continue tostrengthen without periodic setbacks. Down payment and equityprotection can preserve a homeowner's personal household assets,but it can also lift all boats to help a community prosper. Yes, itdoes take a village. Now imagine a village that is risk-proof.That's not utopia. That future is here.

Joe Melendez is CEO of ValueInsured.He can be reached at 214-432-5572 or [email protected].