A national credit union group wants states to delay property tax filing deadlines to help credit unions struggling with nonperforming mortgage loans during the coronavirus crisis.
The National Association of Federally-Insured Credit Unions (NAFCU) is urging the nation’s governors to postpone tax bill deadlines until the fall.
The relief is needed as credit unions try to cover costs associated with nonperforming mortgage loans while maintaining operations and making loans to affected borrowers and small businesses during the pandemic, NAFCU President and CEO B. Dan Berger said.
“This combination threatens to put a significant strain on credit union capital,” Berger said in an April 9 letter to Maryland Gov. Larry Hogan (R), chair of the National Governors Association.
Because of the pandemic and the ensuing economic slowdown, many credit union members are expected to ask for postponements of mortgage payments in the coming months, according to Berger. The anticipated surge in forbearance requests will occur about the same time that credit unions’ real property tax payments come due, resulting in “a crippling expense for credit unions,” he said.
“With a significant volume of forbearance applications expected over the next few months and no relief on the required expenditures related to these loans, credit unions may see a negative impact on their net worth as they are forced to use capital reserves to cover these costs,” Berger said.
The pandemic has created “unprecedented stresses on credit union capital and liquidity,” Berger said. Many credit unions are struggling to make payroll and fund operations while preparing to fund new loans to provide their members with relief during the crisis, with limited capital and without the reliable income of loan payments, he said.
“If real property tax authorities across the United States would extend tax payment deadlines in the summer and spring into the fall, that would create some relief for credit unions during which time other solutions to the strain on capital and liquidity can be determined,” Berger said.
“This relief would prohibit a negative impact on credit union net worth and free up capital to make loans to affect consumers and small businesses,” Berger said.