NCUA Unveils Details of Mortgage Plan

WASHINGTON — Credit unions must not dilly-dally in applying for funds under NCUA’s Credit Union Homeowners Affordability Relief Program. The initiative could help 10,000 credit union members get the terms of their mortgages rewritten.Credit unions must apply for funds, which originate from the Central Liquidity Facility and will be funneled through the corporate credit unions, by Dec. 19. The program is designed to help credit unions lower rates so that borrowers won’t spend more than 38% of their monthly income on their mortgages.NCUA announced the plan last month but didn’t fill in the details until last week, after it received approval from the Treasury Department and the Federal Reserve.CU HARP won’t cost taxpayers any money because credit unions will repay CLF with interest and each CLF advance will be fully secured by a NCUSIF guaranteed CU HARP note or CU System Investment Program note (see related story, page 1), plus a first-priority security interest in other assets of participating credit unions.“As I have stated previously, I want to use all tools at my disposal to address the difficulties that the larger market problems are presenting for the credit union industry,” NCUA Chairman Michael E. Fryzel said in a statement.He said that plan will “employ the existing CLF channel and direct liquidity where credit unions and their members need it most.”In the statement released last Tuesday, the NCUA said, “CU HARP enables CLF to provide advances to eligible credit unions to invest in a CU HARP note guaranteed by the National Credit Union Share Insurance Fund.”“The note will provide up to a 1% bonus over the CLF advance rate. Credit unions will be required to match the bonus and thereby provide up to 2% inmortgage rate relief for homeowners,” the state-ment added.The criteria for mortgage modification are: target payment-to-income ratio of 31% to 38%, minimum mortgage interest rate of 3%, maximum household income of 150% of median income for the ZIP code, and verified owner-occupied residence.NCUA spokesman John McKechnie said it is “hard to gauge how the industry will react” but noted that they had received positive feedback from Congress, the Department of Treasury and the Federal Reserve.He said President-elect Barack Obama’s transition team is aware of the plan, but it did not give any reaction. A phone call by Credit Union Times to the transition office was not returned.CUNA and NAFCU both said their initial reaction to CU HARP was positive, though they are stillawaiting comments from credit unions to see if itwent far enough to help enough individual creditunion members.CUNA Chief Economist Bill Hampel said the program will help consumers who are only having trouble making payments because the interest rate is too high. He expressed concern that it may not be veryhelpful to people who are having trouble making payments because they are unemployed or facing a health emergency.He also pointed that some homeowners with ARMs are already getting interest rate relief because of rate reductions triggered by the Federal Reserve’s recent series of rate cuts.NAFCU President/CEO Fred Becker said, based on initial review, there are “no show stoppers” that would make the program unappealing to credit unions. And it could provide relief to homeowners who are being hurt by the higher interest rates, he added.The program is at least partially based on the CU RoundTable’s Member Mortgage Relief Initiative proposal. During an Oct. 21 meeting with Fryzel, the group presented its plan, under which corporate credit unions would distribute funds to credit unions, which could use the funds to modify, pay off or bring current, existing first or second real estate loans.Gary Oakland, president/CEO of BECU and a spokesman for the initiative group did notreturn phone calls seeking comment on the program before deadline.CU Members Mortgage, a leading provider ofmortgage services to credit unions, declined to comment on the plan.–[email protected]