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.

Is Your Home Mortgage Worth Refinancing?

Given the recent downturn in interest rates, many homeowners are taking advantage of the opportunity to refinance and save, but how do you know when refinancing is worth it for you?

Many home mortgage holders have jumped on the opportunity to save some cash, but there are plenty of ways to invest that money back into your home. Partners Credit Union Member Dave Yoder used the low rates to cut his mortgage term in half by investing his monthly savings back into the term of the loan, cutting 15 years off his loan.

“We moved in to a new home a year and a half ago and put down a sizeable down payment — more than 20 percent,” Yoder says. “We put $100,000 down on a $300,000 home, so we had quite a bit of equity in the home. Our home mortgage with Chase had a 30-year term with a 6.25 percent interest rate.”

When the mortgage crisis happened, Yoder watched the mortgage rates closely, looking for an opportunity to refinance for a lower interest rate.

“When the mortgage rates dropped I went online and did some research on lendingtree.com and I started getting calls from lenders,” Yoder says. “They all claimed their rates were the best, but I told them I was just collecting information. The calls started pouring in and everyone wanted a deposit to get things started. I was telling my story to a colleague when he told me about Partners. I already had a home equity line of credit with Partners, so I thought I would give it a try.

I called Partners Home Mortgage and talked to Natasha. She explained the current rates and gave me some options from the start with no nonrefundable deposit attached to it. Plus, I felt comfortable having Partners on property where I work. In the end, I refinanced with Partners and dropped my interest rate from 6.25 to 4.25 percent, and reduced the term from 30 to 15 years. On top of shaving 15 years off my mortgage term, I was able to keep the home equity line of credit I had with Partners. With another lender, I would have been forced to pay off any lines of credit associated with the loan to refinance.”

Yoder was able to get a great rate and save years on his loan because of smart financial planning. Beginning with the large down payment on the initial loan, to using his savings from the refinance to invest back into the loan, Yoder continually looked for the next best option for his investment.

“I can’t say how it could have turned out any better,” Yoder said. “Having Natasha as my primary contact and her proximity to my work location here was a huge benefit. It was easy to drop off paperwork and Partners even sent someone to have us sign off on the loan at our house.”

This year, home mortgage rates hit the lowest percentile on record since Freddie Mac began tracking mortgage rates in 1971. Find out if it’s worth it for you. If you’re looking to refinance, relocate, buy or sell your home, stop by a branch, visit PartnersFCU.org or contact a Partners Home Mortgage Counselor at (800) 948-6677.

Getting the Home Loan You Need

The downturn of the housing market has at least one silver lining for aspiring home buyers. A market that only a few years ago was tilted firmly in favor of home sellers has now undergone a reversal. In this market, home buyers are definitely in the driver’s seat, and that means that buyers with the credit and down payment they need can negotiate some excellent prices. Savvy home buyers can land some bargains that would have been undreamed of only a few short years ago.

Of course, one of the reasons the housing market is in such disarray is the fact that mortgages have suddenly become more difficult to obtain. At the height of the housing boom, it seemed that any buyer who could sign his name to a loan document was instantly eligible for a huge mortgage, and it was these overly generous lending standards that ultimately led to the collapse we are now living through.

Even though mortgages are now more difficult to come by it is important to keep in mind that home buyers across the country are still buying homes — and still getting the mortgages they need to purchase the homes of their dreams. Many would-be home buyers have been discouraged by the doom and gloom being reported, erroneously believing that it will be impossible to find a mortgage. The truth is that while lending standards are indeed more stringent, qualified home buyers can still expect to get the funding they need to purchase a great home.

The key to getting that mortgage is to be prepared. The days of no money down loans, no income verification loans and other excesses are largely gone. Home buyers these days will need to provide solid information regarding how much they earn, the assets they have and other financial information. Having this information readily available will make the process to secure financing quicker and much less stressful.

Additionally, a good down payment can be very valuable both in terms of landing a mortgage and in terms of providing financial stability. One of the most common scenarios today is the homeowner who owes more than the home is worth. Putting at least 20 percent down can help home buyers avoid this dangerous predicament while enhancing the chances for an affordable mortgage loan at a great rate.

Finally, make sure to develop a good relationship with your lender. Buying a home will most likely be the biggest and most complicated purchase you will ever make, so finding a lender that you trust and that will consider the best financing programs for your circumstances is essential to securing the mortgage for the house of your dreams.

5 Myths About Reverse Mortgages

A Popular Option for Seniors Age 62 and Older

Reverse mortgages, also known as home equity conversion mortgages, are becoming a popular option for seniors age 62 and older who are dealing with shrinking retirement accounts and higher health care costs. Here are some commonly held misconceptions about these FHA-insured loans:

Myth #1: I’ll lose some of my Social Security benefits due to the extra income.
Because the money you receive from your reverse mortgage is not considered income, you are not taxed on the proceeds. Your Social Security and Medicaid benefits remain the same as long as the money you receive from the loan is used within the same month you receive it. You can choose to take out the equity in your home as a lump sum, opt for recurring monthly payments, or use it as a line of credit that can be accessed in emergencies or as needed. Additionally, because the loan is secured by the equity in your home, you don’t need to meet the income and credit qualifications that are required in traditional mortgages.

Myth #2: If I am unable to repay the loan, I’ll lose my home.
Unlike many deferred payment loans that allow a defined grace period before payments become due, a reverse mortgage has no established time limit that triggers repayment of the loan. As long as your home is your principal residence, you are not required to make any repayments toward the loan, though you are still responsible to continue making payments on your property taxes and insurance. You also retain the title to your property as long as you are living there.

Myth #3: I will only qualify if I own my house outright.
While you do need to have a significant equity stake in your home to qualify for a reverse mortgage, you do not have to own it outright. If your home is still being financed through a traditional mortgage, you will need to use part of the proceeds from your reverse mortgage to pay off your remaining balance. In fact, many seniors who choose this type of financing do so to eliminate their monthly mortgage payment.


Myth #4: I won’t be able to pass my home to my family through my estate.
 In the event of your death, your heirs will still be able to make the final decision on the disposition of your home. If they choose to sell it, the remaining equity in your home after the reverse mortgage is repaid will go to your estate. If they would prefer to keep the home instead, they can refinance the home with a traditional mortgage and pay off the balance due on the loan.

Myth #5: I could end up owing more than what my house is worth.
The reverse mortgage loan amount that you qualify for depends on a variety of factors including your age, the amount of equity present in your home and the current interest rates. After considering these factors, the loan is structured with the intent to keep you from owing more than the current value of your home. If, at the time of sale, your house is worth less than your loan balance, the FHA will cover the difference.

Want more help?
Numerica has partnered with Security Reverse Mortgage to educate our members on all aspects of reverse mortgages. To find out if you are in the right position for this type of loan, call us at (800) 455-4265.