December 15 2010 (Chris Moore)

Two years ago, a North Carolina credit union launched a mortgage assistance program that has had unprecedented success and should be a model for the mortgage industry. At a time when mortgage holders have been overwhelmed with foreclosures, the State Employees Credit Union (SECU) has used a little old fashioned preventative medicine to keep homeowners in their homes.

When the program was launched almost two years ago, the giant credit union asked its loan officers to contact its members who were showing signs of financial distress, primarily those who were 30 days or more behind on their payments, and to let them know that the credit union had alternative payment plans available to them.

SECU’s Mortgage Assistance Program offered its member’s options like extending the length of a mortgage, accepting partial payments for six months, and modifying the terms of the loan.

The payoff for SECU…last year the credit union foreclosed on 179 homes out of 121,625 outstanding mortgages and home equity loans or 0.15%. Compare that against the industry standard of 10.54 percent of loans belonging to the state’s banks. This year, the rate stays the same, as only 175 out of 123,815 loans have been foreclosed on.

“None of the programs we have in place call for the rest of the membership to subsidize a mortgage,” said Coburn. “The homeowners still owe it, but they will be paying it later. When they already owe us the money, we will make exceptions to our normal underwriting guidelines … to make the payments affordable.”

The league, he added, has also kept foreclosures rates low by practicing conservative loan policies. “When you take out a loan from a credit union, in effect you’re borrowing money from other credit union members.”

By comparison, private mortgage companies and banks traditionally wait to hear from the borrower to call them first before they take any steps towards assisting the homeowner. By the time the borrower contacts their lender, they’re so far behind it’s almost impossible to catch up and with the sheer numbers that we have seen during the economic downturn, it’s easy to see why we have a crisis.

SECU says that their mortgage assistance program isn’t that much different than the loan modification packages that are being offered by the huge servicing companies and banks, but its SECU’s “execution and resources” that has given them the advantage in how they’ve been able to help their homeowners cope.

Another North Carolina credit union, Local Government Federal Credit Union (LGFCU), has been able to duplicate SECU’s success with its more than 190,000 members by emulating SECU’s program.

Tags: mortgage loans, mortgage assistance, mortgage industry, credit union, mortgage assistance program, homeowners, payment plans, loan modification, mortgage companies, banks