NCUA Gives OK To Shared-Appreciation Loan Modifications

unions are permitted to offer shared-appreciation loan modifications for borrowers struggling to make their mortgage payments, as long as they are conducted in a safe and sound manner, the National Credit Union Administration (NCUA) said in [link=http://www.ncua.gov/news/express/xfiles/09-0426.pdf][u]legal opinion[/u][/link] letter late last month. In response to an inquiry from Michigan Credit Union League President and CEO David Adams, Robert Fenner, the general counsel for the NCUA, clarified that NCUA members may offer shared-appreciation mods. ‘Nothing in our lending rules prohibits [a federal credit union] from offering a shared-appreciation loan modification, assuming it is done in a safe and sound manner,’ Robert Fenner wrote to Adams on May 28. In green-lighting the shared-appreciation approach, however, Fenner encouraged credit unions that consider this modification type to consult with a tax advisor to learn about the tax implications involved. "We also note shared appreciation loan modifications can raise tax issues for members," Fenner's letter reads. "The Internal Revenue Service has issued a revenue ruling addressing the federal income tax consequences to a mortgagor under a shared appreciation mortgage loan used to finance the purchase of a home." SOURC

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