The $83 million Musicians' Interguild Credit Union of Hollywood, Calif., has a beef over how examiners treat modifications on interest-only loans and its CEO/Treasurer Marc Jacoby is outspoken on the topic.
In an interview with Credit Union Times, Jacoby claims his CU is being made the scapegoat and unfairly singled out by the regulators who he contends are classifying those interest-only loans as delinquent on Call Reports.
Both the NCUA and the California Department of Financial Institutions declined to comment on this specific dispute, citing privacy on CU exams. But a spokesman for the NCUA noted that a CEO wanting to discuss exams knows there is a process to do so.
Jacoby has complained that his CU is targeted "as an example of what awaits credit unions who write modifications that don't conform to the FDIC model that has been tacitly endorsed as gospel by the regulators."
Jacoby explained that his 7,500-member CU wrote a number of real estate loan modifications for terms of three to five years with a "motivation to keep members in their homes until the economy improved."
The position of the regulators, however, "is indicated in our LUA/DOR that these loans were considered delinquent and should be reported" in the quarterly Call Reports.
"It was made clear that interest-only modifications are completely unacceptable," said Jacoby. noting that "100% of these loans have been performing–making contractual payments per the modification agreement–and all have done so in excess of the regulatory six-month reporting period."
"As a result of an onerous and arbitrary ruling. our credit union is now compelled to report unheard of levels of delinquency" at 17%. Such a stance serves only "to get the attention of vendors and service providers."
In a statement NCUA Chairman Debbie Matz said, "NCUA supports credit union efforts to find creative solutions for members who need loan modifications to stay in their homes. As part of our efforts, the NCUA board will be reviewing our current policy on Troubled Debt Restructuring in the near future."
"NCUA is seeking solutions that would better assist credit unions which are working diligently to provide members with alternatives to foreclosure. Of course, any solutions must be consistent with generally accepted accounting principles and NCUA's mission to protect credit union safety and soundness."
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