WASHINGTON–Credit unions are eagerly awaiting the new Congress and new Obama Administration for a hint at where legislative priorities will lie. Washington won’t be lacking for issues on which to concentrate, from restructuring the financial regulatory system–which credit unions generally oppose if NCUA is involved– to creating new mortgage underwriting standards, on which credit unions are reserving judgment until any legislation’s language can be reviewed.
But its first priority is likely to be unfinished business from 2008: preventing home foreclosures. Though lawmakers enacted a major bill designed to do just that, and federal regulators have talked about doing more, little has stemmed the tide of foreclosures, which could reach 10 million over the next five years.
Democratic leaders–with wider majorities on both sides of Capitol Hill and control of the White House–are expected to press for systematic loan modifications and a bill that would allow judges to rework mortgages in the bankruptcy process. Though there have been similar efforts before, lawmakers said they expect quick action next year.
“President-elect Obama has said that he is very much supportive and interested in getting loan modifications done and indicated that the bailout should have done that,” Rep. Maxine Waters told American Banker, an affiliate of Credit Union Journal. “That is high on my agenda and I think high on the agenda of a lot of legislators who are just caught without being able to help their constituents who are in these home foreclosure problems.”
Rep. Waters was one of many lawmakers who had expected the current administration to deal with the issue using the $700 billion Troubled Asset Relief Program. Despite requirements in the Oct. 3 legislation that the program offer its own foreclosure mitigation plan, however, it has not yet done so. The incoming administration is expected to quickly offer its own plan.
“The single biggest issue is going to be loan modifications,” said Laurence Platt, a partner at the law firm K&L Gates. “They are going to throw the kitchen sink at it.”
The incoming administration has already said foreclosure prevention is a top priority. According to the Obama-Biden transition team website, the administration will “instruct the secretaries of Treasury and Housing and Urban Development to use their existing authority to more aggressively modify the terms of existing mortgages.” It is also developing “a plan to work with state housing agencies to coordinate broad mortgage restructurings,” the site says.
What impact the shift to an Obama administration will have on policy is hard to gauge, since the president-elect is not sworn in until Jan. 20, but congressional leaders have clearly remained engaged in the issue.
Lawmakers and industry participants have praised one of the few comprehensive plans to emerge, a systematic loan modification plan endorsed by Federal Deposit Insurance Corp. Chairman Sheila Bair. It lays out a framework for conducting modifications and would combine cash incentives to servicers of $1,000 per loan, with guarantees on a portion of any losses after six months.
–Stacy Kaper
