Joint Report Available Online and through REAL Solutions® League Liaisons
(March 17, 2009 - Washington, DC) – 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, and industry-wide, credit union lending expanded in 2008. 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 released a report to help credit unions address one of the most pressing issues: Helping Members Avoid or Survive Foreclosure.
The report is available free of cost on the REAL Solutions Impact Center at: http://realsolutions.coop.
“We believe getting this information out to the state leagues and credit unions if of vital importance,” said REAL Solutions National Program Director Lois Kitsch.
“Foreclosures are having a devastating impact on communities across America,” REAL Solutions Field Coach and U.S. Department of Housing and Urban Development (HUD) Technical Assistance Consultant Mark Lynch told 30 State Credit Union League liaisons during the latest REAL Solutions conference call. “Few if any of us have ever seen a problem of this magnitude,” he added.
“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, 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,” Lynch said.
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.
Once a mortgage goes into foreclosure, the member is likely to be approached by scam operators, who 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.”
Lynch stressed the importance for credit unions to develop a proactive communications strategy. “Getting the correct information and education to your members and potential members at the right time is essential. The key message to credit unions is to be proactive and not wait for your 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.”
“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,” said Ratigan, “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 or by contacting Terry Ratigan at email@example.com, or (800) 437-8711 x251.
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.