WASHINGTON — NCUA Chairman Michael E. Fryzel said today his agency plans to tap the central liquidity fund to provide credit unions with funds so they can provide lower mortgage rates.
Under the credit union homeowners affordability relief program (CU HARP), the credit union, in exchange for the reduced likelihood of borrower default on the mortgage, would also match the rate break, doubling the benefit to struggling homeowners, the agency said.
"The consumer must not be left out of the broader government efforts to mitigate the housing and credit market dislocations. CU HARP is an effort to foster a solution whereby the NCUA and credit unions work together to assist distressed borrowers," Fryzel said in a statement.
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Borrowers participating in CU HARP would be subject to eligibility standards, including income level, default or danger of default, and required occupancy. The credit union would have the option of setting the period of rate break (three to five years) and would be able to create a 40-year maturity and/or reduce the principal balance to increase mortgage affordability.
CUNA President and CEO Dan Mica praised the plan.
"This plan-a product of creative thinking-is a welcome addition to the tools credit unions are already using to help their members face down financial challenges. In fact, some credit unions that many of these members belong to could likely benefit from assistance themselves. A further, welcome addition would be for the agency to adopt a troubled asset relief program for credit unions, by credit unions-to help those credit unions in distressed areas that are bearing the brunt of the collateral damage from the real estate crash."
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