WASHINGTON – The NCUA Board is expected to vote as soon as next month on a plan to offer $2 billion in low-cost funds to credit unions through its emergency loan fund, the Central Liquidity Facility, in order to facilitate the refinancing of at-risk mortgages.
The plan, dubbed CU Homeowners Affordability Relief Program, or CU HARP, must also be approved by the Treasury Department and the Federal Reserve, both of which have jurisdiction over the CLF. "CU HARP is an effort to foster a solution whereby the NCUA and credit unions work together to assist distressed borrowers," said NCUA Chairman Michael Fryzel, who announced the program yesterday.
The plan, which was proposed to Fryzel just a month ago by the CU Housing Roundtable, represents an unprecedented collaboration between the government and the private sector to alleviate the ongoing mortgage crisis. It comes a week after the FDIC introduced its own plan to use $24 billion in funds from the Treasury’s Troubled Asset Relief Program to finance adjustments of millions of at-risk mortgages.
The major difference in the plans is that the credit union proposal would consist of loans, while the bank plan would provide taxpayer dollars, according to NAFCU President Fred Becker, who sits on the advisory committee of the housing roundtable. "This is a credit union solution incented to get money down to the homeowners, down to where the money should be going, instead of to the big banks, who are using it to fund acquisitions and other things," said Becker, who has been discussing the plan with Fryzel over the past week. "We think it’s an opportunity to get loans out there to people who need them the most."
Gary Oakland, president of Boeing Employees CU, who proposed the program to NCUA last month on behalf of the housing group, said it is an opportunity to help needy credit unions members, many of whom been set back by troubled mortgages with other lenders. He said many of his members are holding distressed loans they obtained at area banks, like Washington Mutual, the local banking giant that failed recently because of its exposure to troubled mortgage loans.
"This is not an attempt to gain market share," Oakland told The Credit Union Journal yesterday.
"This is really a situation where everybody has been talking about protecting the institutions, and this is a chance to help the members, the customers of those institutions."
Oakland’s BECU, which owns credit union mortgage CUSO PrimeAlliance, organized the CU Housing Roundtable, which first aired the proposal at its October meeting, then sent it on to NCUA Chairman Fryzel for his consideration. Many of the biggest credit unions are participants in the roundtable, including: Alaska USA FCU, Alliant CU, Bellco CU, Bethpage FCU, Eastman CU, Financial Partners FCU, First Technology CU, SchoolsFirst FCU, Stare One CU, Suncoast Schools FCU and Wescom CU.
Under the plan, NCUA will make low-cost funds, as low as 1.75%, available to participating credit unions through the CLF. The CLF, which was almost unused for the past decade, has become the focal point of a credit union assistance program. NCUA has funneled more than $1.7 billion in short-term liquidity loans through the fund since September, when Congress agreed to increase its funding to $40.5 billion, from $1.5 billion.
Credit union participating in CU HARP would be subject to eligibility requirements for members, like income level, default or danger of default, and borrower occupancy. The credit union would have the option of setting the rate break and would able to increase the maturity of the loan as long as 40 years.
