WYANDOTTE, Mich.–One credit union here that has been among the lenders offering members the option of deferring their mortgage payments during the pandemic is reporting few have taken advantage of the opportunity—and says that’s a good thing.
Carma Peters, CEO of Michigan Legacy CU, said the pandemic has resulted in a much different mortgage environment than that of the Great Recession more than a decade ago, which the credit union described as 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 in a statement. “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.”
Few Takers
The $251-million Michigan Legacy CU said it has had few takers for mortgage forbearance, which it credits in part to the fact it thoroughly educates members to ensure they understand the financial consequences. MLCU pointed out to members, for example, that deferring two months of mortgage loan payments 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, the credit union noted.
According to Michigan Legacy, of the 1,128 mortgages in its portfolio—representing $68.4 million in loans—just 10 have taken advantage of the deferred payment option.
“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.
‘The Reality’
“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 continued. “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 also credited the locally owned nature of credit unions for really making a difference in the financial lives of members by “working out financial strategies that are more personalized and relationship-based.”