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News Now

CU System
Financially challenged seniors will look to CUs--experts
MADISON, Wis. (7/26/12)--A new study from AARP that found Americans age 50 and older are carrying more mortgage debt than ever before has repercussions for credit unions, experts say.

As of December, about 3.5 million mortgage loans held by people age 50 and older were underwater--they owe more than their home is worth, according to the study (News Now June 20). That means more seniors have no equity in their homes, which has long been considered as a source of financial security for the elderly.

Because the age of the average credit union member tilts toward this demographic some credit unions may be surprised how many of their members are at least on the edge of the group noted in the study, said Mike Schenk, Credit Union National Association (CUNA) vice president of economics and statistics.

"Credit unions might consider reaching out to older members--those with a mortgage at the credit unions and other older members that may have a mortgage elsewhere--to proactively offer financial counseling services," said Schenk.

Paying off a mortgage is especially critical for seniors because it affects the percentage of working income needed in retirement that financial planners so often quote, said Mark Lynch, a credit union consultant and REAL Solutions field coach, who is developing a retirement planning fair for the National Credit Union Foundation.

Seniors with high or underwater balances will require retirement incomes equal to nearly 100% of the working incomes, Lynch said.

"The best advice going forward is that credit unions should do whatever they can to help their members plan for retirement as early as possible," Lynch said.

With wealth lost as a result of the recession, financial planning is more important than ever, he added.

Among the policy solutions the study suggested was mediation, which often leads to loan modification.

"Credit unions have shown the ability or willingness to help borrowers explore options to foreclosure, including the policy solutions suggested in the paper, such as mediation, counseling and loan modifications," Schenk said.

Schenk noted that credit unions are usually agreeable with extending terms but would generally strongly object to any policy that would require principal reduction as a modification tool.
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