CUNA praised the joint statement for providing both "prudence and sound financial management while leaving latitude for institutions to actually help mortgage borrowers in need," but complained the letter did not get specific enough about the details of what the agency would allow CUs to do.

"Our concern, however, is there has been no guidance to examiners that the agency has shared with credit unions on how this letter is being implemented," the association wrote. CUNA was emphatic about the importance of the matter, saying "We urge NCUA to ensure examiners are well-versed in the provisions of the statement regarding workout arrangements and are provided adequate training to recognize reasonable plans and the sufficiency of risk mitigation efforts. Guidelines and training information provided to examiners on this matter should be shared with credit unions as soon as possible."

At the same time, CUNA stated that the agency's letter had not addressed some fundamental questions about what's allowed when helping members get out from underneath a bad mortgage. "Will credit unions be permitted to assist members when the value of their home has declined to less than the balance of the current mortgage?" CUNA asked. "Could such assistance include second mortgages that cover the excess balance over the appraised value of the home?"

Other question topics included the latitude CUs have to work with members to lower payments and the leeway credit unions will have to set loan loss reserves for the restructured mortgage loans.

"Helping members in times of financial difficulties is a hallmark of the credit union system, but credit unions may not be able to assist to the extent they might otherwise if NCUA does not take a proactive role in making sure examiners, as well as credit unions, understand the agencies' meaning in the workout provisions in the Statement on Subprime Mortgage Lending."

For its part, sources at NCUA said the agency was puzzled at CUNA's reaction and also little miffed that the first thing NCUA heard about CUNA's concerns was the letter that was copied to Congress.

"We are disappointed that CUNA has called for more restrictive requirements concerning the restructuring of certain types of mortgage lending," said NCUA Board Chairman JoAnn Johnson. "NCUA does not agree that examiner judgment should be substituted for that of credit union lending professionals, and we reject CUNA's suggestion to impose explicit prescriptions in this area. The strong and rigorous supervisory regime created by NCUA enables credit unions to manage their portfolios while maintaining a very high level of safety and soundness, and we intend to continue with prudent modifications as market conditions dictate."

Agency sources expressed disappointment that CUNA had not first sought to meet with the agency to perhaps discuss the issues before writing a letter to Congress which could be taken as an indication that NCUA was not training its examiners sufficiently.

But Mary Dunn, CUNA's deputy general counsel and senior vice president of regulatory advocacy, said that CUNA had meant its letter in only the most positive sense and that it had not meant the agency to take it as a request for a "laundry list" of NCUA restrictions. She also recounted that unlike some at NCUA who said they had not heard from CUs on the issue, Dunn said that CUNA had heard from some of its members.

"The thing is that we had credit unions who were asking us what some of the terms in the joint statement meant in real world terms," Dunn said. "Some credit unions were very concerned about, for example, starting a program to help members with mortgage problems and then finding out in the course of regular examination or some other examination that the agency has a problem with it."

What credit unions wanted, Dunn said, was a chance to work with NCUA to get a better feel for what the guidelines mean in a practical way. "When the pen hits the paper and things really get moving, what do the 'workout arrangements' really mean," Dunn asked. "Credit unions want NCUA to work with them to clarify what, by necessity, was couched in very generic terms in the joint statement."

But NCUA sources said the agency was not really interested in writing any hard and fast underwriting guidelines for credit unions. If CUs want to set up a program to help members restructure mortgages and if they put the program together according to the long standing examination manual for safety and soundness, NCUA encourages them to do that, the agency explained.

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