WASHINGTON — Credit unions must not dilly-dally in applying forfunds under NCUA's Credit Union Homeowners Affordability ReliefProgram. The initiative could help 10,000 credit union members getthe terms of their mortgages rewritten.
Credit unions must apply for funds, which originate from theCentral Liquidity Facility and will be funneled through thecorporate credit unions, by Dec. 19. The program is designed tohelp credit unions lower rates so that borrowers won't spend morethan 38% of their monthly income on their mortgages.
NCUA announced the plan last month but didn't fill in the detailsuntil last week, after it received approval from the TreasuryDepartment and the Federal Reserve.
CU HARP won't cost taxpayers any money because credit unions willrepay CLF with interest and each CLF advance will be fully securedby a NCUSIF guaranteed CU HARP note or CU System Investment Programnote (see related story, page 1), plus a first-
priority security interest in other assets of participating creditunions.
“As I have stated previously, I want to use all tools at mydisposal to address the difficulties that the larger marketproblems are presenting for the credit union industry,” NCUAChairman Michael E. Fryzel said in a statement.
He said that plan will “employ the existing CLF channel and directliquidity where credit unions and their members need itmost.”
In the statement released last Tuesday, the NCUA said, “CU HARPenables CLF to provide advances to eligible credit unions to investin a CU HARP note guaranteed by the National Credit Union ShareInsurance 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 therebyprovide up to 2% in
mortgage rate relief for homeowners,” the state-
ment added.
The criteria for mortgage modification are: targetpayment-to-income ratio of 31% to 38%, minimum mortgage interestrate of 3%, maximum household income of 150% of median income forthe ZIP code, and verified owner-occupied residence.
NCUA spokesman John McKechnie said it is “hard to gauge how theindustry will react” but noted that they had received positivefeedback from Congress, the Department of Treasury and the FederalReserve.
He said President-elect Barack Obama's transition team is aware ofthe plan, but it did not give any reaction. A phone call by CreditUnion Times to the transition office was not returned.
CUNA and NAFCU both said their initial reaction to CU HARP waspositive, though they are still
awaiting comments from credit unions to see if it
went far enough to help enough individual credit
union members.
CUNA Chief Economist Bill Hampel said the program will helpconsumers who are only having trouble making payments because theinterest rate is too high. He expressed concern that it may not bevery
helpful to people who are having trouble making payments becausethey are unemployed or facing a health emergency.
He also pointed that some homeowners with ARMs are already gettinginterest rate relief because of rate reductions triggered by theFederal 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 programunappealing to credit unions. And it could provide relief tohomeowners who are being hurt by the higher interest rates, headded.
The program is at least partially based on the CU RoundTable'sMember Mortgage Relief Initiative proposal. During an Oct. 21meeting with Fryzel, the group presented its plan, under whichcorporate 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 theinitiative group did not
return phone calls seeking comment on the program beforedeadline.
CU Members Mortgage, a leading provider of
mortgage services to credit unions, declined to comment on theplan.
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