Loan Modification Creates Opportunity

Nothing is more crucial to economic recovery than the easy flow of credit, and federal credit unions are doing their part.

“In 2008, our lending grew at 7.5 percent, the highest growth rate in three years,” says Patrick Keefe, vice president of communications for the Credit Union National Association (CUNA). The National Credit Union Association (NCUA) also reported positive numbers, stating that mortgage lending grew at 14.5 percent last year.

In an episode of “Meet the Press,” embattled Treasury Secretary Timothy Geithner bluntly said, “Credit is like the blood or oxygen of the economy, and for us to get the economy growing again we need to make sure there’s credit available to business and families so businesses can meet payroll so they can expand, so that people can put their kids through college, so they can purchase a car or a new house.”

In our financial system, typically less than half of lending to business and consumers comes from credit markets outside the banking system. Existing government programs have already had some effect in helping to unfreeze those markets.

Recently the Fed, in conjunction with the U.S. Treasury, announced a new and powerful program leading to the issuance of about $9 billion in loans — more than in the previous four months combined. New loan modification programs are making it easier for people to get access to credit by refinancing and renegotiating lower interest rates.

Credit union regulatory agencies encourage all federally regulated financial institutions that service or hold residential mortgage loans to participate in the “Making Home Affordable” loan modification program. The Treasury Department requires institutions receiving financial assistance under the Financial Stability Plan (established under the Troubled Assets Relief Program) implement loan modification programs in accordance with the Treasury Department’s guidelines.

Credit union regulatory agencies strongly support the program’s goal of promoting sustainable loan modifications for at-risk homeowners that appropriately balance the interests of homeowners, servicers, and investors. They also worked closely with the Treasury Department to develop guidelines. Credit Unions are more risk averse in nature than banks, and their security is especially attractive in this economic landscape. Given the doom and gloom espoused from the business press these days, it is especially advantageous for credit unions to make their position of fiscal strength and mission of helping highly publicized.

“Credit unions are safe, sound, strong and federally insured up to $250,000. They were not involved in the subprime lending debacle that ruined our economy, and they don’t take on high-risk investments because with credit unions, 70 percent of all mortgages are held in portfolio. There’s no incentive to take risk,” Keefe stated.

NCUA Vice Chairman, Rodney E. Hood, recognizes the challenges posed by our current economy. Hood was able to look beyond the bleak present and strike an optimistic tone for the future of the credit union industry. “There has never been a better opportunity for credit unions to demonstrate our mission of ‘People Helping People.’ This is your time to be bold, be heard and be there,” Hood says.

What is a loan modification? 

Loan modifications allow credit unions to make loan payments more affordable for borrowers. They may change interest rates, loan terms, loan balances, or other parts of the loan agreement.

How do I get a loan modification? 

To get a loan modification, just call your credit union and let them know about your financial situation. Explain whether or not you’ll be able to make your payments. If they agree, you may qualify for a loan modification.