SACRAMENTO, Calif. -- The Golden 1 Credit Union President/CEO Teresa Halleck wants to reach out to those who have lost their homes in the last 18 months to foreclosure, especially those who have been taken advantage of by lenders.

Earmarking $20 million to refinance the mortgage loans of existing members or new members that are in foreclosure, Halleck said that many people "didn't know what they were getting into." They financed elsewhere and were placed into adjustable-rate mortgages that will reset to a new payment they cannot afford.

"We didn't benefit from this," Halleck said, referring to the subprime lending meltdown that has now infected the credit markets and caused a crisis of confidence on Wall Street. The tool kit opened by the Bush administration, including a stimulus package and efforts to get lenders to do mortgage workouts, hasn't picked up traction, according to results noted by the Treasury Department and consumer advocate groups. (See related story on page 1.)

"We never made any subprime loans," said Halleck, adding that her credit union had monitored the real estate markets for volatility and made adjustments that protected the CU's members. "We have a credit risk officer on staff, and when we saw the economy start to slide, we made changes. We pulled back on indirect lending and made other hard choices."

Because of those conservative underwriting guidelines, The Golden 1 CU is in the position to help distressed some borrowers. "Our financial positioning and strength allow us to lead the industry by stepping forward with innovative products to make a difference for Golden 1 members who may not have realized the very unfriendly terms and conditions offered by certain major lenders, such as Countrywide and the former World Savings Bank."

The Golden 1 CU has assets of $6.6 billion, a first-mortgage portfolio of $3.3

billion and $1.4 billion in

equities. "We're not a big adjustable-rate lender," Hal-leck said. Only 24% of the CU's mortgages are adjustables, and only 21% of its equity loans are adjustable.

She is aware that stepping up to help borrowers is the right thing to do and that now is the time for credit unions to play a bigger role in the mortgage marketplace. "This is a prime example of how credit unions can make a difference in the communities they serve and distinguish themselves from banks," said Halleck. "And we hope other well-positioned CUs will step forward to help affected members and show the true spirit of credit unions in action." She believes The Golden 1 CU's Mortgage Repair Loan is the first of its kind in the area and perhaps one of the first in the nation.

Subprime borrowers who are Golden 1 members can qualify for a repair loan if they have lost their primary home to foreclosure by another lender within the past 18 months due to negative amortization, interest rate reset payment shock or a high prepayment penalty.

The program requires stable employment and offers a fully amortizing 30-year fixed-rate conforming mortgage loan with escrows.

A strong ability to afford the mortgage loan and debt service to other obligations, debt counseling, full documentation of income and assets, property appraisal and title report, auto payment with direct deposit and checking at The Golden 1, and a minimum FICO score of 600 are required.

The single-family home must be a purchase the borrower will personally occupy, and the borrower must agree not to have any home equity loans against the property for at least two years.

"In essence, we have structured a loan with good, solid terms to give these subprime borrowers a true ability to regain homeownership with debt they can afford based on their economic circumstances, along with a debt counseling requirement to help them succeed," said Halleck.

"Unlike the subprime loans that trapped these borrowers, The Golden 1's Mortgage Repair Loan does not include negative amortizations, interest rate resets, or high prepayment penalties," she said. "With home prices having fallen 15%- 20% in some of our local areas, we are confident these subprime purchasers can reasonably reestablish homeownership if they demonstrated good payment histories before interest rate payment reset shock triggered them down a path of bank foreclosure activity."

The Golden 1 introduced the program in the first week of March and has yet to close a loan, but Halleck said the CU was working with NeighborWorks, a community action group to get the word out.

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