WASHINGTON-The credit union lobby turned its efforts to the Senate last week after the House passed a bill over its objections that would allow troubled homeowners to ask a bankruptcy court to amend the terms of their mortgages.
CUNA and NAFCU continued to fight the bill even after Democrat House leaders agreed to ease the so-called cramdown provisions by requiring that lenders share in any profits after a property in bankruptcy is sold, and make a reduction in interest, rather than principal, the main focus of the bankruptcy judges.
"While we appreciate their continuing to work with us, we still have serious concerns," said NAFCU President Fred Becker.
"The amendment is a step in the right direction, but not a step far enough in the right direction," said Ryan Donovan, senior lobbyist for CUNA. "We cannot support the bill even with the new language, but we look forward to working with the Senate to improve the bill.
Proponents of the cramdown bill say the measure is necessary because of the rapidly rising numbers of troubled homeowners. They note that debtors may now ask a bankruptcy court to amend any other type of loan, including second and third residential mortgages, but not first mortgages on a primary residence, which is what the bill would do.
Both NAFCU and CUNA are continuing to push lawmakers to limit the cramdown provision to subprime, Alt-A and other non-traditional mortgages, which would keep the vast majority of credit union home loans out of the bankruptcy courts.
A broad base of banking groups, headed by the American Bankers Association, has joined the credit union lobby in opposing the bill.
In passing the bill last week House made it difficult for credit unions to wage an all-out fight by tying the cramdown bill to a deposit insurance bill they support. That portion would extend the $250,000 coverage for all federally insured deposits that was passed last summer, as well as allow NCUA to stretch out the assessments to pay for the $5 billion corporate credit union bailout for as long as five years.
