LA HABRA, Calif. — American First CU has offered select members in good standing an opportunity to dodge a potential financial bullet.

Members with interest-only mortgages, whose loans have been set to balloon to a fully amortized principle and interest payment, have been given the chance to take part in the CU's Interest Only Relief Loan.

Chief Lending Officer Art Hickson explained that the program allows members to extend their interest-only loan payments by five years, while adding 10 years to the life of their 30-year adjustable rate mortgages. "This was simply to help our members-this group of people that's been doing everything right and paying on time-get through the end of this recession knowing they wouldn't have a problem," said Hickson.

Product Good For Both Member, Lender
Interest-only loans and adjustable rate mortgages have both been much-maligned by critics who have said they contributed to the creation and then deflation of the housing bubble, and Hickson said that helping members with the program was a way to enable "a soft landing" for both the borrower and the lending institution.

Hickson declined to reveal the number of members who have taken advantage of the program, but said it was for "a small group" of the CU's 55,000 members. The 59-year-old CU currently has more than $550 million in assets.

He explained that if members "couldn't make a higher payment now, then we'd have to call these loans and foreclose on a property right away. In doing this, we're making it better for the member and for everyone involved."

Not The Same As A Loan Modification
While most members undertaking a loan modification program go through something similar to a credit counseling service, said Hickson, members who have taken part in the Interest Only Relief Loan initative had the changes in their loan terms fully explained to them, but did not go through a full financial literacy session.

Still, he said, there is little risk to American First, and that the program received NCUA approval. "As far as we're concerned, we're simply helping the member at this point. If we did not change the terms of the loan they'd have a higher payment now and a hardship. We did this to help our members in a tough time. We know they can't refinance right now on a normal Fannie/Freddie guideline. They've been making their payments, so we were trying to support them the best we can. That was our intent."

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