NEW NCUA POLICY WILL KEEP MEMBERS
IN THEIR HOMES
For over a century, credit unions have striven
to help members achieve the American dream.
It is, no doubt, extraordinarily difficult when
you find it necessary to foreclose on a home
and force a family to move out.
similar modifications for other types of loans as
So when credit union officials told me that an
NCUA policy was forcing them, in some cases,
to foreclose on financially troubled members
who were requesting lower payments, I
committed to change that policy. Board
Members Hyland and Fryzel immediately
joined this effort.
Providing Relief to Credit Unions
In addition to benefiting members, the new TDR
policy will provide regulatory relief for credit
unions. It will allow credit unions to calculate
delinquency consistent with loan contract terms
on the TDR without having to immediately report
the formally restructured loan as “delinquent”—
and without having to track each TDR loan’s
performance manually for six months.
Manual tracking was certainly an unintended
consequence of our previous policy; so I appreciate
that credit union officials made the effort to make
me aware of this unnecessary burden.
After careful consideration and collaboration
with several top accountants in the credit
union industry, the NCUA Board voted
unanimously to propose a new policy on
Troubled Debt Restructuring (TDR).
Keeping Their Homes
Our new TDR policy is designed to more
easily allow credit unions to ensure that
members who can no longer afford to make
full payments on their original mortgages can
keep their homes if they agree to certain
modified terms with their credit union.
Among the loan workout options used by
credit unions are longer loan terms and lower
monthly payments. Credit unions can make
It’s important to remember that modified loans are still very high risks for
default. In fact, over 16 percent of outstanding modified loans remain delinquent.
From a regulatory perspective, credit unions must strike the right balance
between modifying loan terms to help troubled members continue making
payments, while charging off non-performing delinquent loans that are
clearly unlikely to be paid back.
Credit unions must also establish responsible policies to manage the
interest rate risks that come with extending long-term loans at historically
low fixed rates.
The NCUA Board limited the comment period on our new TDR policy to
30 days (instead of the usual 60 days), so credit unions can implement the
change as quickly as possible.
This relief measure is part of my ongoing Regulatory Modernization
Initiative. In the spirit of President Obama’s Executive Order on Regulation
and Independent Agencies, when we find that current rules are ineffective or
overly burdensome, NCUA will eliminate or streamline those rules, providing
that we do not sacrifice safety and soundness.
If there are other rules that warrant modernization, please be sure to
let us know.
For more details on the NCUA Board’s proposed TDR policy and the final interest rate risk management rule,
see Board Actions on page 3.