Maryland Legal Alert for Financial Services

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Maryland Legal Alert Special Edition - Credit Unions

NCUA INITIATES HOMEOWNERS AND CREDIT UNION ASSISTANCE PROGRAMS

Yesterday, the NCUA issued a media advisory providing details on two programs: (1) the Credit Union Homeowners Affordability Relief Program (CU HARP), and (2) the Credit Union System Investment Program (CU SIP). Both programs are supported by the NCUA's Central Liquidity Facility (CLF).

CU HARP provides assistance to low and moderate income credit union member homeowners that are struggling to make mortgage payments by modifying outstanding loans in order to lower monthly mortgage payments. CU HARP is only applicable to existing first mortgages held by a participating credit union or originated and serviced by a participating credit union. The program will function by enabling CLF to provide advances to eligible credit unions to invest in a CU HARP Note guaranteed by the National Credit Union Share Insurance Fund (NCUSIF). The Note will provide up to a 1 percent bonus over the CLF advance rate if the credit union provides interest rate relief to struggling homeowners. Credit unions will be required to match the bonus. As a result, eligible homeowners may receive up to 2 percent mortgage rate relief for a 2 year period, permitting the monthly payment to be reduced, thereby reducing the expected probability of default.

CU HARP Application Date: Credit unions must provide their agent corporate credit union with a subscription by 2:00pm CST on Friday, December 19, 2008. Awards will be announced on Monday, December 29, 2008 and funding and required investment transactions will occur simultaneously on January 2, 2009. The CU HARP Term Sheet and Allocation Formula are available on the NCUA's website.

CU SIP provides contingent liquidity for the credit union system and complements CU HARP by enabling the CLF to lend to credit unions to invest in NCUSIF guaranteed notes, the proceeds of which will be used to retire external system debt.

CU SIP Application Date: Credit unions must initially provide their agent corporate credit union with a subscription by 2:00pm CST on Friday, December 26, 2008. Awards will be announced on Monday, January 5, 2009 and funding and required investment transactions will occur simultaneously on January 9, 2009. The CU SIP Term Sheet and Allocation Formula are available on the NCUA's website.

For more information, please contact Chris Rahl.