WASHINGTON – It's been four months since CUNA announced the creation of the credit union industry's billion-dollar mortgage lending initiative, the Home Loan Payment Relief (HLPR) program. While some CUs have put their arms around the initiative, others are coming on-board slower than supporters would like to see. As of Feb. 6, 100 credit unions had committed a total of $963,393,000, and there was one credit union pending board approval with an approximate commitment of $10 million. In addition, 46 of the participating credit unions – nearly half – had reported originating HLPR mortgages worth $12.2 million. CUs had received a total 370 applications for HLPR mortgages of which 269 had been approved and 60 denied. Steve Rick, senior economist for CUNA said the remaining 41 applications were either in the pipeline waiting to be approved or the applicant had withdrawn their application. He emphasized that there is no requirement for a CU to report to CUNA when they make a HLPR loan and those that do report the loans do so voluntarily. Consequently the CUs that have originated the loans do not provide reasons why loans are denied. Rick says, "Credit unions are continuing to show strong interest for the loans," noting that he gets at least two to three calls a week from credit unions showing "strong interest" in participating and inquiring about how to obtain disclosure forms and to review the basic mechanics of the program, including how the interest rate is configured. The HLPR loan is a three-year, adjustable-rate mortgage offered to qualifying borrowers at 1% below the national average for these loans. For example, for the week ending Feb. 10, the national average rate on 3/1 ARMS was 6%, and the HLPR rate was 5% or less. The required down payment on the loan can be no more than 3%, and gifts or grants are permitted. After three years, the rate adjusts annually to market rates, with rate adjustments capped at 1% a year and 5% over the life of the loan. The loan is available to borrowers whose household income is either at or below the area median income, with additional eligibility for applicants in "high cost" designated areas. In addition, participating credit unions are encouraged to reduce closing costs, private mortgage insurance costs and other fees on the loan. Suncoast Schools FCU, Tampa, Fla. was one of the "charter" participating CUs in the HLPR program. The $5 billion CU committed nearly $50 million to the initiative. As of press time, SSFCU had made more than 50 loans totaling $7.5 million. President/CEO Tom Dorety said the credit union has always had a "keen" interest in the issue of the availability of affordable housing. On its own, Suncoast offers various programs to serve low-income first time homebuyers including those that provide 97-100% funding, "so the HLPR program fit in nicely with our own products," he said. "Even though the interest rate was slightly less than what we were willing to accept, there isn't any incremental hit on our returns," he explained, adding that Suncoast is discussing offering a similar type of product with a fixed rate. "We have very few fixed rate mortgages on our books, so we can afford a little more interest rate risk," said Dorety. The SSFCU president described the HLPR program as a "worthwhile national effort to get credit unions upfront with offering affordable housing and serving the underserved," and he said he's disappointed more haven't signed on to participate. "All credit unions should be looking at this, particularly large credit unions," said Dorety. "They're probably offering different mortgage products for the underserved and decided the HLPR program didn't fit into their strategy and so didn't join. I really hope more credit unions join." Suncoast Schools has 400,000 members, and its field-of-membership includes the educational community in 15 counties on the West coast of Florida plus 800 select employee groups. Dorety said the credit union put information about the program on its Web site and in its newsletter and it has had a lot of members inquiring about it. He explained that members can go to the SSFCU Web site and click on the various counties the CU serves to learn the income qualifications. For those members who don't qualify for a HLPR loan, SSFCU finds another mortgage product they qualify for. "So whether they fit specifically with the HLPR program or not, we still find a way for them to get a mortgage with us," said Dorety. Teachers FCU President/CEO Robert Allen is also disappointed more credit unions haven't signed on to HLPR yet, but he's willing to give those credit unions the benefit of the doubt and remains optimistic that they will. Like Suncoast, the $2 billion TFCU was in the charter group of CUs that joined the HLPR initiative. So far it's received and approved four loan applications worth $1.2 million. It has an additional $1 million in HLPR loans in its pipeline. The first application was filed within the first 30 days that Teachers joined the HLPR program, and the loan was made to a family in the $90-$100,000 household income range. "There are a certain number of credit unions, even some large ones, who take a `wait and see if it will work' attitude. It takes a lot to get a national program where everyone's committed to reducing their yields and an interest rate done on a national basis. It takes some explaining to a board especially in a market like we have today where spreads are tightening," said Allen. Teachers FCU is well aware of the rising cost of homes on Long Island, N.Y. and the lack of affordable housing. The credit union has 160,000 members and serves the primary education community in Suffolk County, N.Y. including students, teachers and their families. According to Allen, on Long Island the term `affordable housing' comes up a lot on the political scene. Because of the high price of homes in the area, a member could apply to buy a house costing from $240,000 to over $400,000 and still qualify for a HLPR loan. "Overall my board was receptive to the idea of us participating in the HLPR program," said Allen. "They're very cognizant of the community and the cost of housing. All the board members come out of the teaching community so they're aware of teachers' salaries as well as what homes go for." Like Dorety, Allen encourages more credit unions to sign on to HLPR, stressing "there's a need for this type of program with our members. This is a strong program for credit unions to examine." To those credit unions that may be concerned about the risk to their yields because of the interest rate, Allen said their incomes are "safeguarded" because of the rate adjustment caps. CUNA's Rick said the trade association's goal is to have $2 billion committed to the program by the end of 2006, and the five-year goal is to have $10 million committed. He explained that all the information about the program including a Q&A section and disclosure form, are all on CUNA's Web site. Credit unions can find the answers to nearly all their questions by going there, he said, and he encouraged credit unions to strongly consider joining the initiative. -

[email protected]