Charley Challenges Credit Unions' Mortgage Lending Practices, Policies

TAMPA, Fla. – It’s been two weeks since Hurricane Charley slammed into southwest Florida, sparing the Tampa-St. Petersburg metropolitan area where forecasters originally thought the category four hurricane would make land fall, but eventually touching down and wreaking devastation in Port Charlotte and communities in Punta Gorda and Fort Myers before moving northeast through Orlando and then on to the Atlantic Coast near Daytona Beach where it eventually headed out over water and turned north. As residents in the affected communities continue to assess damages – some are still without power – mortgage lending staff of credit unions that have branches in the areas, such as Suncoast Schools FCU and Florida Central CU have been busy working with members there who have mortgages with their credit union or had refinance applications in the works when the catastrophe hit. Suncoast Schools’ SVP of Lending Don Charron said about 15-20% of the mortgages in the credit union’s pipeline were for refinances on homes in the Port Charlotte and Punta Gorda areas, as well as portions of Lee County. The loans were at various stages, but the CU determined that the ones that were most critical and had to be dealt with first were those that had already been processed but were in the three-day right of recision phase. Some of these homes had sustained damages, but Charron said they were mostly those with a lower loan-to-value. “We went down there to look at these homes and see their condition. You wouldn’t believe the look of surprise on members’ faces that we had enough interest in them to come down,” said Charron. “A lot of them had no idea we’d still close on their loan.” “The main thing is we don’t want to hold anyone up. We’re doing anything we can to move this forward. We went ahead working with contractors to make repairs to these homes. We know we’ll run up into a crunch, there’s so much damage and just too few contractors. It will be a few months out before these homes get repaired,” he added. Charron said Suncoast has set up drawers for these homes like it does with construction loans. The next group of mortgage loans are for those that had been approved and had appraisals, “but we don’t know if the house is still standing,” said Charron. These homes will have to be reappraised, and Suncoast is going to have to resort to using its mortgage staff to do that because appraisers are “jammed” because of the circumstances. “We’re going to have to be flexible and use our most talented people who have some experience in that area,” he explained. The next group of mortgage applications are those for homes that hadn’t been appraised yet and were set up to close in the next few weeks. Charron said these will be the “most challenging part. We may have to do some of those appraisals internally.” Those Suncoast members who had purchase mortgages with the credit union will have to settle with their insurance company and will eventually receive checks made out to them and the credit union. Charron said Suncoast will treat those loans like construction loans and work with contractors and members to rebuild. “That’s the nature of lending, particularly mortgage lending. You always run that risk,” said Charron, adding that Suncoast has already made 400 loan extensions to members in the hardest hit areas. Suncoast is also offering a $1,000 loan at a reduced rate of 6% for a one-year period for members directly affected by Charley. The credit union has already set up a triage of six or seven people to assist these members. From his observation, Charron said “there’s never been anything like this. The last significant hurricane we had in this area was Hurricane Donna in 1960.” Florida Central’s Jan Lund, mortgage loan officer in charge of mortgage loan originations seconds that motion. She said after the storm left town, members in the cities of Arcadia, Nocatee, Port Sienna (all located near Port Charlotte) and Kissimmee (near Orlando) started calling the credit union with damage reports or property they were purchasing or refinancing. Lund said the mortgage loans in the pipeline for members in these areas when the hurricane hit were split 50/50 between purchases and refis that were getting ready to close this month. “These members are in a state of flux because some homes have more damage than others. Members who were buying homes may want to renegotiate the prices, so there are a lot of unknowns,” she said, echoing Charron that “so far there’s no way this soon to get an assessment on damages.” What Lund does know so far is that Florida Central’s mortgage loan portfolio will be “greatly impacted. We were scheduled to close 20 loans this month and six of those were in the Port Charlotte, Arcadia and Nocatee areas. That’s pretty strong, and will impact our loan portfolio by about a third.” -