Institution offers deferral mortgage options hoping members won’t take them
Media Contact: Barbara Fornasiero; EAFocus Communications; firstname.lastname@example.org; 248.260.8466
Wyandotte, Mich. —February 3, 2021 —Michigan Legacy Credit Union (MLCU) CEO and President Carma Peters says the pandemic has wrought a much different mortgage environment than that of the Great Recession – and it’s one of shared experiences, rather than ‘us versus them.’
“People are still paying their mortgages; that’s the biggest change from 2008-2009,” Peters said. “The pandemic has created a much less adversarial relationship between banker and borrower because we truly are in this together. Mortgage holders want to talk with us about how they can continue to make their payments. In the Great Recession, when homes were worth less than their mortgage loan, homeowners simply wanted to turn in their keys.”
Contrary to some national trends, Peters says her credit union, which has $261 million in assets, has not had many takers on its deferred mortgage payment option – but that’s likely because the credit union thoroughly educates members to ensure they understand the financial consequences. For example, deferring two months of mortgage loan payments (60 days) until the end of the loan, with additional interest accruing, will likely result in more than two additional payments over the life of the loan. In rare cases, they steered members to refinance, rather than defer payments.
“While we offered deferrals, we strongly discouraged members from taking them if their income had not been affected because of the pandemic, or if the hit to their income did not justify a mortgage payment slowdown,” Peters said. “Talking with our mortgage holder members, we learned they had no significant financial impact from COVID-19 yet, but that doesn’t mean they are out of the woods. If they were to fall behind later in the loan because of a true financial hardship, they’d already used the best financial tool we have to help them hold onto their home.”
Consequently, of the 1,128 mortgages in MLCU’s portfolio (valued at $68,455,079 total loan amount), only 10 homeowners took advantage of the deferred payment option. Peters said that similar or longer options offered by national mortgage companies, which had more takers, can set some people up for failure.
“It’s unrealistic to expect mortgage holders to be able to pay for four months of mortgage payments at once if their income has been impacted, but that was the deal with certain national deferral options,” Peters said. “While these programs – and ours – are well meaning, the reality is they are not going to help people who have taken what could turn out to be a serious, long-term financial hit.”
Peters, who has worked in banks and credit unions her entire career, sees the advantage of credit union membership when times are hard.
“95% of all credit unions are locally owned, so decisions are made where the members are, and not in an out-of-state headquarters,” Peters said. “Local decision-making can really make a difference in the financial life of our members by working out financial strategies that are more personalized and relationship-based. Looking out for the members’ financial well-being has always served the credit union well, and we are counting on that to continue in the future.”
About Michigan Legacy Credit Union
Michigan Legacy Credit Union (MLCU) is a member-owned, not-for-profit financial cooperative serving members who live, work, worship, attend school, or own a business in the state of Michigan. With six physical branches in Flat Rock, Garden City, Highland, Pontiac, Warren and Wyandotte, and a mobile app that provides credit union services—such as opening an account, changing an address, applying for and closing on a new loan, including mortgages—via a virtual video teller, Michigan Legacy Credit Union is committed to providing quality financial services at a competitive price, delivered professionally and efficiently while keeping member/owners and their needs first. For additional information on MLCU, visit: www.michiganlegacycu.org.