WASHINGTON (12/7/07)—The National Credit Union Administration (NCUA) Thursday backed “good faith attempts to facilitate loan modifications” to help troubled subprime mortgage borrowers, calling prudent workout arrangements good for both credit unions and their members.
The NCUA has encouraged its federally insured credit unions to work with troubled borrowers using appropriate loss mitigation strategies including loan modifications and work out plans when available and practicable, NCUA Board Member Gigi Hyland said in her written testimony. CLICK TO VIEW SLIDESHOW (Photo provided by CUNA)
Testifying before the House Financial Services Committee, NCUA board member Gigi Hyland noted that, while delinquencies and foreclosures in credit union mortgage lending have increased, they remain a very small part of overall credit union real estate lending. However, Hyland stressed that the NCUA is “mindful of the broader market dislocation" and vowed that the agency will continue its work to encourage judicious mortgage lending by credit unions, particularly in the non-traditional segment of the market. While supporting Congressional scrutiny of the subprime mortgage market, Hyland also offered her agency’s suggestions regarding several proposals currently being considered by the committee. They included:
* Broadening language to include FHA as well as VA loans in a definition of mortgages qualified for certain workout plans; * Extending the window for workouts and modifications from 6 to 12 months; * And conforming a definition of "reasonably foreseeable default" to one used by NCUA and other regulators in lending guidance issued earlier this year.
Hyland also urged lawmakers to be “balanced and consistent” in their approach to the current subprime crisis. She raised concerns regarding an provision in a House-approved bill (H.R. 3915, The Mortgage Reform and Anti-Predatory Lending Act of 2007) intended to provide basic protections to mortgage consumers and investors. That provision would impose civil penalties on creditors who violate minimum standards for writing mortgage loans. Hyland said the NCUA supported the additional penalty as a deterrent but is concerned that, as written, the penalty would not be applied equally to offenders. “It appears that under this amendment, a federally regulated entity would be subject to an administrative monetary penalty and a civil penalty in contrast to non-federally regulated entities. This result would be inconsistent with the general direction of H.R. 3915 of applying similar regulatory standards to all mortgage loan originators,” she said. "NCUA supports any responsible effort that enhances consumer protection while preserving the mortgage financing market's ability to attract and retain capital and liquidity," Hyland added. Also during the hearing, Chairman Frank generally applauded today’s announcement by the Bush administration (see related New Now
story) regarding subprime mortgage workouts. The White House said mortgage lenders have voluntarily agreed to help homeowners with subprime mortgages taken out between January 2005 and July 2007, as those borrowers face resets to a higher, and perhaps unaffordable, rate—facing the threat of foreclosures. However, Frank expressed frustration with a part of the plan that he said would exclude those with credit scores higher than 660 from being eligible for help. Frank said borrowers who managed their credit wisely should not be unfairly punished: "I think it is a terrible idea for us to perpetuate." Other witnesses testifying before Frank’s committee included:
* Panel One: Sheila C. Bair, chairman, Federal Deposit Insurance Corporation; Randall S. Kroszner, governor, Federal Reserve Board; John C. Dugan, comptroller, Office of the Comptroller of the Currency ; Scott M. Polakoff, senior deputy director/CEO, Office of Thrift Supervision ; and North Carolina Deputy Commissioner of Banks Mark E. Pearce, on behalf of the Conference of State Bank Supervisors. * Panel Two: Faith Schwartz, executive director, HOPE NOW Alliance; Hilary O. Shelton, director, National Association for the Advancement of Colored People;; Damon Silvers, associate general counsel, AFL-CIO; and Richard Kent Green, Oliver T. Carr, Jr. Chair of Real Estate Finance, The GW School of Business, George Washington University. * Panel Three: Laurence E. Platt, partner, K&L Gates, on behalf of the Securities Industry and Financial Markets Association;Josh Silver, of the National Community Reinvestment Coalition; and Michael Calhoun, president, Center for Responsible Lending.
Use the resource link below to access written testimony.