WASHINGTON-The credit unions and banks apparently succeeded last week in convincing Democrat House leaders to moderate the so-called cramdown bill that would allow homeowners to ask bankruptcy courts to amend the terms of troubles mortgages.
But the compromise falls short of the changes sought by the rivals, who are fighting to limit the measure to subprime, Alt-A and other non-traditional mortgages.
The proposed compromise would allow bankruptcy courts to amend the terms of a mortgage with the priority on reducing the interest rate first-instead of the principal amount of the loan - the so-called cramdown. It would also require that the lenders share in any profit earned after the home is sold.
Still, the main credit union lobby groups - CUNA and NAFCU - vowed to continue efforts to limit the cramdown bill as it moves to the Senate. Several credit union groups, including the Self Help CU affiliate Center for Responsible Lending and the National Federation of CDCUs, continues to support the cramdown bill as is.
House leaders made it difficult for the credit union lobby to wage an all-out effort against the cramdown bill by attaching it to a separate bill that would extend the temporary increase in federal deposit insurance coverage to $ 250,000, where it was raised from $100,000 in July. Making it even tougher for credit unions to oppose was a provision on the deposit insurance bill that would allow NCUA to stretch out the $5 billion National CU Share Insurance Fund assessment to pay for the corporate credit union bailout to as long as five years.
