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Mortgage modification to 40 years ok
A residential mortgage loan modification is permissible for federal credit unions as long as the term of the renegotiated loan doesn't exceed 40 years, NCUA said in a legal opinion letter Friday.
The letter, from NCUA General Counsel Michael McKenna, says this means federal credit unions can "provide residential mortgage loan modification programs consistent with Federal initiatives aimed toward financial recovery for troubled homeowners."
Federal credit unions are allowed by statute to provide residential mortgage loans with maturities up to 40 years. The opinion letter responds to inquiries regarding that statutory limit on loan modifications. The way NCUA explains it, the modification doesn't extend the term of the original loan but is treated as a new loan contract, which cannot exceed a term of 40 years.
"Based on this reading of the rule, when a loan modification is a new or subsequent transaction, the loan term is determined from the modification date," wrote McKenna."A loan modification that is a new or subsequent transaction complies with the 40-year maturity rule if, at the time the FCU makes the new loan (i.e., the date of the modification), the new loan is made for a period not exceeding 40 years."
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