Vice Chairman Hood Encourages Affordable and Sustainable Mortgage Lending Practices
April 2, 2009, Alexandria, VA – National Credit Union Administration (NCUA) Vice Chairman Rodney E. Hood yesterday addressed the American Credit Union Mortgage Association (ACUMA) Spring Conference in San Francisco, Calif. The event focused on promoting ideas and solutions that would reinforce continuing mortgage lending opportunities for credit unions. Hood stressed that credit unions should seize this opportunity to engage in responsible mortgage lending, emphasizing the importance of pre- and post-purchase counseling as well as rent-to-own strategies that provide the financial education necessary to eventually sustain homeownership.
April 1, 2009, San Francisco, Calif., -- NCUA Vice Chairman
Rodney E. Hood with John Reed, Chairman of ACUMA Board of
Directors and President/CEO of Maine Savings Federal Credit Union.
The Federal Home Loan Bank (FHLBank) offers various affordable housing programs and encourages credit union participation. Such programs include; Affordable Housing Competitive Program (AHP), IDEA/WISH Program, Homeownership Preservation Subsidy, and Access to Housing and Economic Assistance for Development (AHEAD) Program. For more information regarding the FHLBanks Community Investment Programs, please visit their website at: http://www.fhlbanks.com/.
While credit unions did not cause the problems permeating the American economy, they are well positioned to differentiate themselves from other financial institutions and become part of the solution for economic recovery. Supporting this, Mr. Hood sited the following data: “NCUA Call Report data for 2008 shows that loan volume grew 7.7 percent from 2007 to $528.6 billion with real estate loan volume comprising 54 percent of total loans. Lending expanded in most categories, with the largest being a 14.5 percent increase recorded in first mortgage real estate loans and lines of credit.”
Hood went on to emphasize the critical importance of financial education to help member-owners understand the responsibilities of homeownership. “It is imperative that these programs be tailored to help inform people of the transition from renting to ownership. I would like to ask you all to fine tune your training efforts to provide follow-up training to homebuyers to discuss budgeting, maintenance and repair issues.” To that end, Mr. Hood suggested that credit unions pursue partnerships with results-oriented non-profit organizations that can provide resources for training outreach efforts – such as the Neighborhood Reinvestment Corporation.
As a strong proponent of risk mitigation, the Vice Chairman underscored the necessity for proactive risk strategies. Citing the recently released Financial Crimes Enforcement Network (FinCen) report, Filing Trends in Mortgage Loan Fraud, Hood stated, “From July 1, 2007, to June 30, 2008, financial institutions filed 62,084 Suspicious Activity Reports reporting mortgage fraud. Credit unions filed 541 Suspicious Activity Reports for this same period, a 167 percent increase over the prior year.” For more detailed information please see the FinCen website at: http://www.fincen.gov/.
In addition to fraud risk, Hood discussed the importance of mitigating both interest rate risk and balance sheet risk. “It is also imperative to manage interest rate risks as credit union shares grew 7.7 percent last year to $68.1 billion,” said Mr. Hood. This growth is concentrated primarily in short-term certificates and is being used to fund long-term assets. At federally insured institutions, long-term assets to total assets are 23.2 percent and first mortgages comprise over 30 percent of total loans.
In an effort to help mitigate balance sheet risks, the Vice Chairman drew attention to Fannie Mae, Freddie Mac products as well as FHA loans. Fannie Mae and Freddie Mac buy mortgages while allowing you to retain servicing rights, which ensures that you continue to make money and remain tied to the member owner. FHA loans are also insured and offer such advantages as: low fixed-rate loans, no pre-payment penalties, simple organization process, low down payment, and simple and straightforward qualifications.
“While the financial industry makes efforts to increase mortgage lending, it is also important to focus on keeping families in their homes when times are difficult,” said Hood. Currently credit unions have seen an uptick in real estate loan delinquencies, up from 67 basis points in 2007 to 119 basis points in 2008. For first mortgages the increase was form 28 to 76 basis points.
“We must focus on efforts that help refinance mortgages and use other tools to assist homeowners,” Hood said and referred the NCUA website: www.ncua.gov for more information regarding loss mitigation efforts.
In closing, Mr. Hood congratulated the National Association of Realtors FCU on their new charter – “I am delighted that our industry continues to grow and thrive with well-managed institutions such as the newly chartered National Association of Realtors FCU…I applaud the efforts of everyone here today – your desire to improve your institutions while sharing your knowledge in order to help others make the same progress truly exhibits the credit union mission of People Helping People.”
The National Credit Union Administration is the independent federal agency that regulates, charters and supervises federal credit unions. NCUA, with the backing of the full faith and credit of the U.S. government, also operates and manages the National Credit Union Share Insurance Fund (NCUSIF), insuring the deposits of over 89 million account holders in all federal credit unions and the majority of state-chartered credit unions.
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