NCUA writes CUs on foreclosed properties

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Dec. 31, 2008 - A Decenber Letter to Credit Unions from NCUA encourages credit unions to work with homeowner/borrowers who are having a hard time keeping up with their loans.

"We continue to urge you to work with your borrowers when possible," NCUA Chairman Michael Fryzel stated in Letter 08-CU-25. "Prudent workout arrangements can be in the long-term best interest of both credit unions and members."

NCUA notes that credit unions are holding an increasing numer of foreclosed properties. It points them to Letter 07-CU-06, "Working With Residential Mortgage Borrowers," for guidance on how to help prevent mortgage foreclosures. It also provides an overview of the issues credit unions should consider when faced with carrying foreclosed and repossessed assets, or FRA, on their books.

"FRA should be actively marketed for sale as evidenced by the fact the credit union has committed to a plan of sale, is seeking a buyer and expects to collect on the sale with in 12 months," the letter states. The letter also provides an overview of risk considerations and factors in protecting and enhancing their value.

"The current financial market has forced credit unions to consider the effects of carrying FRA on their statement of financial condition," the letter states. "You should put in place policies and procedures that establish an acceptable level of risk you can properly manage in order to best protect the safet and soundness of your credit union."

Related Links

NCUA Letter 08-CU-25
NCUA Letter 07-CU-06