WASHINGTON - The Senate was working last week on a compromise housing relief bill that was not expected to include the controversial provision to allow bankruptcy court judges to restructure mortgages.
The measure is opposed by the credit union lobby, which has worked on a proposal that would at least exempt most credit union mortgages.
The bill being crafted by the Senate aims to help millions of homeowners faced with foreclosure by providing $200 million to expand counseling for at-risk borrowers; $10 billion in tax-exempt bonds for local housing authorities to help them refinance subprime mortgages; and a $15,000 tax credit for people who buy foreclosed homes that have been sitting vacant for an extended period of time.
The prospects of the bankruptcy provision were dim last week, even as Senate supporters of the measure vowed to continue to fight for it. The measure is opposed by most Republican senators and by President Bush, who has promised to veto any bill that reaches his desk with the provision in it.
Under current law, bankruptcy courts are not permitted to modify the terms of a mortgage on a debtor’s primary residence.
The credit union lobby is opposed to the measure because it could encourage troubled homeowners to file for bankruptcy just to get their mortgages restructured. However, NAFCU has led an effort to carve-out most credit unions mortgages from the provision by having it aimed mostly at subprime or nontraditional loans, which few credit unions make.
An estimated 4.2 million homes were either past-due or in foreclosure at the end of last year, and as many as 1.5 million of them are expected to be foreclosed on.
The Senate bill is one of a number of legislative initiatives aimed at curbing the housing crisis. Another measure would allow the Federal Housing Administration to insure $300 billion to $400 billion in additional mortgages.
