NCUA: FCUs may modify with shared-appreciation loans

WASHINGTON (6/15/09)--In a letter to Michigan credit union representatives, the National Credit Union Administration said that credit unions may offer shared appreciation loan modifications to individual borrowers.

According to NCUA, nothing in their current rules would prevent federal credit unions from "offering a shared appreciation loan modification, assuming it is done in a safe and sound manner."

Shared appreciation agreements allow mortgage holders to reduce the balance of their loan by sharing any future increases in the home's value with the cooperating credit union.

In the letter, the NCUA said that such "prudent workout arrangements" can prevent foreclosures by creating workable solutions for both credit unions and homeowners. NCUA generally encourages credit unions to "work with members who could benefit from various loan modification arrangements." However, the NCUA said, credit unions that wish to take part in mortgage loan modification should consult a tax adviser and should also contact the Treasury to ensure that their actions are permissible under the loan modification guidelines in the Treasury's Making Home Affordable program.

For the full letter, use the resource link below.

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NCUA letter on shared appreciation loan modifications


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