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CUNA urges examiner training on loan workouts
WASHINGTON (1/9/08)--The Credit Union National Association (CUNA) Tuesday urged federal regulators to ensure that credit union examiners are well-versed in identifying how much latitude credit unions have in helping members restructure or refinance problematic mortgage loans. In a letter sent to each member of the National Credit Union Administration (NCUA) board, CUNA referenced NCUA Letter No. 07-CU-09, which transmitted a joint statement on subprime mortgage lending adopted by the agency and other federal financial regulators last summer. That statement contains a number of important directives, including provisions on “Workout Arrangements.” “These provisions reflect prudence and sound financial management while leaving latitude for institutions to actually help mortgage borrowers in need. Our concern, however, is there has been no guidance to examiners that the agency has shared with credit unions on how this letter is being implemented,” wrote CUNA President/CEO Dan Mica. Mica noted that credit unions, for the most part, have avoided the kinds of adjustable-rate subprime mortgage loans that banks and others initiated “to the detriment of so many consumers, our economy and the global financial marketplace. “ “While credit unions have generally not been involved in making such nontraditional loans, we anticipate that borrowers will increasingly be seeking help from their credit unions to restructure mortgage loans they obtained elsewhere. “They may also be turning to their credit union to refinance traditional mortgages the credit union or other lender originated but which have become problematic due, for example, to the decreasing value of homes in the borrower’s area,” Mica wrote. He said that well-managed credit unions can be an important source of home financing for borrowers caught in the subprime morass, particularly for members with an acceptable payment history who are able to document income that is sufficient to service a new, more favorable loan or handle restructured terms such as payment agreements. “We urge NCUA to ensure examiners are well-versed in the provisions of the Statement regarding workout arrangements and are provided adequate training to recognize reasonable plans and the sufficiency of risk mitigation efforts. Guidelines and training information provided to examiners on this matter should be shared with credit unions as soon as possible,” urged the CUNA leader. A copy of the letter was also sent to House Financial Services Committee Chairman Barney Frank (D-Mass.).
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