ALEXANDRIA, Va. — The National Credit Union Association said Monday that a federal credit union may set the maturity date for modified or refinanced mortgages beyond the regulatory 40-year maturity limit, as long as the terms of the original loan were no more than 40 years.
"In other words, a loan that complies with the long-term maturity limitation at the time it is made will continue to comply with the maturity rule, even if it is later renegotiated and its maturity is modified," the NCUA told federal credit unions this morning in a legal opinion signed by its General Counsel Michael McKenna.
The NCUA opinion comes as numerous credit unions having recently begun offering mortgages out to 40 years have inquired about the legality of extending the terms of troubled loans to as long as 50 years under the terms of a modification or refinancing.
The NCUA's own rules and regulations allow that the loan term is determined from the modification date and not the origination date. "A loan modification that is a new or subsequent transaction complies with the 40-year maturity rule if, at the time the FCU makes the new loans, the new loan is made for a period not exceeding 40 years," McKenna wrote in the legal opinion.
The NCUA legal chief said the agency believes the interpretation of the rule is consistent with federal guidance on mortgage modifications and with efforts to help more troubled homeowners.