NCUA encourages credit unions to work constructively with residential mortgage borrowers who may be unable to meet their contractual payment obligations. In this supervisory letter the NCUA says that examiners should evaluate the effectiveness of the credit union’s loan modification program and ensure that the program is not masking delinquency or delaying the timely recognition of loan losses. Examiners should evaluate whether management has made a realistic assessment of risk and exercised the proper due diligence in developing, implementing, monitoring, tracking, and reporting the loan modification program. The following aspects are discussed:
- Test for Financial Impact of Modification,
- Risk Assessment and Strategic Planning,
- Management and Staff,
- Legal Review,
- Underwriting Policies,
- Collection Policies and Procedures,
- Monitoring and Reporting,
- Financial Reporting Considerations, and Tax Implications.