Credit Union Hardship Modifications Surge 23% as Navy Federal Accounts for Much of the Increase

New analysis of NCUA data reveals $10.6 billion in modified loans, with the nation’s largest credit union accounting for approximately 43% of the total. Are modifications helping borrowers recover or postponing future losses?

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November 4, 2026 — Credit unions are modifying loans for financially troubled borrowers at nearly three times the rate of overall loan growth, raising questions about the financial condition of borrowers, the effectiveness of loan workouts and whether some credit losses are being postponed rather than prevented.

According to a November 3 analysis by QuarterCall Research, financial-hardship loan modifications increased 23.4% over the past year, reaching approximately $10.6 billion among 4,143 continuously reporting credit unions.

During the same period, total loans at those institutions increased just 7.61%.

While modifications can provide meaningful relief to borrowers experiencing financial difficulties, the growing disparity raises an important question: Are credit unions successfully rehabilitating troubled loans, or are some borrowers simply being given more time before an eventual default?

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One Credit Union Accounts for Nearly Half the Modified Loans

Perhaps the most revealing finding is how heavily the increase is concentrated at a single institution.

QuarterCall reported that one unnamed credit union accounted for 43.2% of all modified loan balances in its study and 62.6% of the annual increase.

A review of publicly available NCUA financial performance data strongly indicates that institution is Navy Federal Credit Union, the nation’s largest credit union.

Navy Federal reported approximately $4.56 billion in loans modified for borrowers experiencing financial difficulty as of September 30, 2026, compared with $3.31 billion one year earlier.

That represents an increase of approximately $1.25 billion, or 37.9%, while its total loan portfolio grew just 6.7%, from $140.19 billion to $149.55 billion.

Modified loans now represent approximately 3.05% of Navy Federal’s outstanding loans, compared with 2.36% a year earlier.

Those figures closely match the concentration and portfolio characteristics described in QuarterCall’s research, although the institution’s identity has not been independently confirmed by the researcher.

Even excluding the largest contributor, QuarterCall found hardship modifications increased 14.26%, compared with 7.70% overall loan growth.

The trend therefore extends beyond Navy Federal, although the industry’s largest institution appears to be responsible for a disproportionate share of the increase.

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Why Is Navy Federal Modifying So Many Loans?

The figures raise questions that cannot be answered by the aggregate Call Report data alone.

Navy Federal serves military personnel, veterans and their families, a membership base that may experience financial disruptions associated with military service, relocation, deployment and other circumstances.

Its large mortgage and consumer lending portfolios also provide numerous opportunities for financial-hardship modifications.

However, the publicly reported figures do not establish which loan categories account for the increase, how many individual borrowers received modifications or how many loans have been modified repeatedly.

That leaves the underlying borrower circumstances, loan types and modification practices as the more important questions.

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Are Modified Loans Performing Better?

Not all the findings are negative.

QuarterCall reported that the percentage of modified loans that were at least 30 days delinquent under their revised terms, or in non-accrual status, declined from 26.8% in September 2025 to 21.9% in September 2026.

That improvement suggests a larger proportion of modified balances are performing under their revised repayment arrangements.

However, making payments under modified terms is not necessarily the same as returning to long-term financial stability.

A borrower whose monthly payment has been reduced or whose loan maturity has been extended may become current without resolving the financial problems that caused the original delinquency.

The longer-term question is whether those borrowers remain current after the modification period and whether repeated modifications ultimately reduce or increase credit losses.

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A Familiar Concern: Are Losses Being Delayed?

The rapid growth in hardship modifications comes as credit unions are reporting mixed credit-quality results.

QuarterCall found that the allowance for credit losses, measured against the combined balances of modified and seriously delinquent loans, declined from 97.3% in September 2024 to 84.2% in September 2026.

That comparison is not a conventional reserve-coverage ratio, since modified and delinquent loans may overlap and credit-loss allowances cover the entire portfolio. Nevertheless, the trend warrants examination.

Importantly, the research did not find broad evidence that credit unions are using modifications to conceal deteriorating loan performance.

Among institutions with substantial modification growth, delinquency and charge-off rates generally increased rather than declined.

Researchers did identify a smaller group of 41 credit unions exhibiting a combination of rising modifications, declining delinquency rates, stable or lower charge-offs and reduced allowance coverage.

Those institutions warrant further observation, but the figures do not establish improper lending or accounting practices.

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What About Auto Loans and Repossessions?

For credit union collections departments, the implications could extend well beyond the modified payment itself.

Auto loan extensions can help borrowers avoid repossession, but they can also extend repayment periods while the underlying collateral continues depreciating.

If the borrower ultimately defaults, the lender may face a larger deficiency balance or reduced recovery value.

However, NCUA’s publicly reported hardship-modification totals do not separately identify auto loans. There is currently insufficient information to determine how much of the reported $10.6 billion involves vehicle financing.

That distinction is particularly important when evaluating Navy Federal’s figures, given the size of its residential mortgage portfolio.

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Relief Today, But What Happens Tomorrow?

The NCUA has identified loan performance, modifications, loss mitigation and credit-loss allowances among its supervisory priorities.

Prudent loan modifications can benefit borrowers and credit unions alike by preventing unnecessary defaults and preserving repayment relationships.

But their effectiveness ultimately depends on whether borrowers can sustain the revised payments and whether lenders accurately recognize the remaining credit risk.

With hardship-modified balances growing significantly faster than credit union lending, the industry faces an increasingly important question.

Are these modifications providing financially stressed borrowers a path back to stability, or are some credit unions merely extending the time before troubled loans become losses?

For Navy Federal, which appears to account for nearly half the modified balances identified in the research, the answer could have implications extending well beyond a single institution.

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