National Credit Union Foundation and Federation Help Members Avoid or Survive Foreclosure
Joint Report Available Online and through REAL Solutions® Leagues
|Despite the massive downturn in the American economy and the erosion of family equity through foreclosures, credit unions have come to the forefront as responsible and trusted providers of affordable credit for millions of Americans. While many large banks have been criticized for hoarding their capital instead of lending to people in need, credit unions have continued to provide their members with loans of all types. Industry-wide, credit union lending expanded over the past year.|
With credit unions expanding their assistance to members in need, the National Credit Union Foundation (NCUF), in partnership with the National Federation of Community Development Credit Unions (Federation), has posted a report for credit unions to address one of their most pressing issues:
Helping Members Avoid or Survive Foreclosure
The report is free on the REAL Solutions Impact Center at http://realsolutions.coop.
“We believe getting this information to leagues and credit unions if of vital importance,” said REAL Solutions National Program Director Lois Kitsch.
|“Foreclosures are having a devastating impact on communities,” REAL Solutions Field Coach and US Department of Housing and Urban Development (HUD) Technical Assistance Consultant Mark Lynch told 30 State Credit Union League Liaisons on the latest REAL Solutions conference call. “Few if any of us have ever seen a problem of this magnitude."|
|According to the Mortgage Bankers Association, a total of 1 million families -- one out of every 200 homeowners -- will enter foreclosure this year. |
"To show how this impacts families’ lives," Lynch pointed out, "this means in the average American classroom, at least one child is at risk of losing his/her home because the parents are unable to pay their mortgages."
Local communities are also feeling the impact. Vacant foreclosed homes often become sites for crime and other neighborhood problems. According to a Chicago case study, The Municipal Costs of Foreclosure, one foreclosure can impose up to $34,000 in direct costs to local government agencies through inspections, court actions, police and fire department efforts, potential demolition, unpaid water, sewage and trash removal.
Develop Proactive Communications!
|Lynch stressed the importance of credit unions developing a proactive communications strategy:|
“Getting the correct information and education to members and potential members at the right time is vital. The key message to credit unions is to be proactive. Don't wait for members to come to you for assistance and advice; at that point it may already be too late for your credit union to help them. If a member has a delinquent mortgage with your credit union, certified housing counselors should work to determine the best way for the member to stay in the home. Most often, this is the best option for both the member and the credit union.”
Work Out Long-Term Loans
|Some credit unions will even refinance mortgage loans up to 80-year terms if taking this action will help members lower their monthly payments enough to afford to keep their homes.|
But rather than expecting members to pay out those longer terms, credit unions plan to reduce the terms once members can afford their regular payments again.
GTE Federal Credit Union CEO Bucky Sebastian explains how this works in a new video linked from the REAL Solutions Impact Center.
|Once a mortgage goes into foreclosure, the member is likely to be approached by scam operators.|
Scam operators take what little money the foreclosure victims have, ruin their credit, and wipe out any remaining equity.
“People in foreclosure typically feel desperate and afraid,” Lynch related. “They look for what seems to be an easy solution – but too often they find devastating results.”
|“Every credit union can help their members with basic, accurate information and appropriate referrals, even if the credit union is not a mortgage lender,” said Terry Ratigan, senior consultant and coordinator of the Federation’s national housing counseling program. “Many members in distress will turn to their credit unions as trusted advisors, so every credit union must be prepared to connect their members to the appropriate resources.” |
Despite credit unions’ desire to help their members, the Federation warned that credit unions should not try to serve as counselors unless they are trained and certified to do so.
“Because of the complex legal issues that arise with potential defaults, and because policies and workout options are changing almost daily, credit unions should not give individual advice,” cautioned Lisa Williams, director of the Federation’s CDCU Mortgage Center, LLC. “Doing so could put the credit union itself at risk.”
|Williams recommended that all credit unions identify housing counseling agencies in their communities that have been approved by HUD, and refer members to those organizations.|
Other resources for credit unions are being developed by the Federation, whose website (www.cdcu.coop) includes a new CU Homeownership Counseling clearinghouse to help credit unions find local, certified housing counselors.
The site includes a list of certified credit union housing counseling agencies, links to the national HOPE Now hotline, scripts to help explain the latest federal loan modification programs, and more.
|As a HUD-approved National Housing Counseling Intermediary, the Federation can also assist credit unions and affiliated non-profits interested in becoming approved counseling agencies.|
Once approved, credit unions are eligible to apply to the Federation for federal grants to support the cost of counseling activities. More information about this program is available on the Federation’s website at www.cdcu.coop or by contacting Terry Ratigan at firstname.lastname@example.org or (800) 437-8711 extension 251.
The National Credit Union Foundation (NCUF) is the US credit union movement’s primary national charitable program provider, fundraiser, and grant-maker.
NCUF’s signature program, REAL Solutions®, helps credit unions provide innovative products and services that have proven effective reaching working families with low wealth and modest means.
NCUF continues to earn the Better Business Bureau seal of approval as an “Accredited Charity” by meeting all 20 of the BBB Wise Giving Alliance Standards for national charities.
For more information about NCUF and its programs, visit www.ncuf.coop.
|The National Federation of Community Development Credit Unions (Federation) represents over 200 community development credit unions (CDCUs) serving urban and rural low-income communities across the United States. The Federation also represents 46 Community Development Partners, some of the nation’s largest credit unions with a special commitment to serving low-income communities.|
Founded in 1974, the Federation is headquartered in Lower Manhattan with offices in Madison, Wisconsin; Colorado Springs, Colorado; and San Francisco, California.
The Federation offers a wide range of advocacy, educational, training, capital, marketing, and outreach programs to support and assist CDCUs.
For more information about the Federation and its programs, please visit www.cdcu.coop.