WASHINGTON – Members of the House easily turned back a bid to add the so-called cramdown provision to the financial services reform bill this morning, after an avid lobby by credit unions and banks opposed to the measure.
The provision would have allowed bankruptcy courts to amend the terms of at-risk mortgages.
Both CUNA and NAFCU had mobilized their members in recent days in opposition to the cramdown provision, which they worry would affect billions of dollars in mortgages held by credit unions.
“While NAFCU recognizes the well-intentioned efforts of this amendment to deal with issues related to the continued fallout from the subprime crisis and the need to mitigate foreclosures, we are pleased that the House recognized that this is not the approach that should be taken,” said Fred Becker, president of NAFCU.
"We opposed this provision because we believed it had the potential to do long-term damage to the mortgage market and undermine the safety and soundness of credit unions," said CUNA President Dan Mica.
The provision was opposed by Republicans and Democrats alike. “The last thing we need is to increase the uncertainty of the residential mortgage market,” said Rep. Daniel Lundgren, D-Calif., during the debate on the provision.
Rep. Lamar Smith, a Republican from Texas, said the cramdown provision would lead to higher interest rates for borrowers who would have to pay the costs of increased losses for lenders.
The cramdown provision passed the House as part of a broader mortgage bill earlier this year, but was rejected by the Senate.
The House is expected to pass the massive financial services reform package, almost 1,300 pages long, later this afternoon.
