WASHINGTON — The National CU Foundation and the National Federation of Community Development Credit Unions are trying to help credit unions understand the devastating effects of the mortgage crisis.
Just ask REAL Solutions National Program Director Lois Kitsch who despite seeing more than her fair share of foreclosures in her hometown of Orlando, Fla., was "stunned" by what the study uncovered.
"Even though I live in a community where I see it everywhere, I was still stunned by the impact of the foreclosure problem in this country today," she told Credit Union Journal. "It's not impacting only the families losing those homes, it's affecting every family in the community where foreclosures are happening. It's not isolated."
According to a Chicago case study, one foreclosure can impose up to $34,000 in direct costs to local government agencies by racking up inspection, court action, police and fire department efforts, demolition, and unpaid water, sewage and trash removal bills. The only way to mitigate those impacts is to stop the foreclosure process completely and that requires good communication between financial institution and member.
"Getting the correct information and education to members and potential members at the right time is vital," REAL Solutions Field Coach Mark Lynch said in a statement. "If a member has a delinquent mortgage with your credit union, 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."
Some credit unions are going to extremes to keep people in their homes. GTE FCU in Tampa has been very creative with some members to lower their mortgage payments and keep them in their homes. In one case, CEO Bucky Sebastian approved refinancing a member's mortgage to an 80-year term to slice her payments from $1600 a month to just $400 a month to get her through hard times.
"When she does get back on her feet the credit union will meet up with her again and will refinance into a more conventional term," said Foundation spokesperson Steve Bosack who called GTE's "good example of the creative workouts we need in this extreme environment."
If a member does slip into the foreclosure process he can become very vulnerable to scam artists who promise to get him out of trouble but instead leaves him with nothing. While credit unions may want to help guide their members through the process, Lisa Williams, director of the Federation's CDCU Mortgage Center, cautioned against getting too involved.
"Because of the complicated nature of the advice that needs to be given and because the situation is changing almost daily, credit unions should not give foreclosure advice unless they are properly trained," she said, adding that CUs should instead refer members to HUD-approved housing counseling agencies.
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