WASHINGTON-With more than $700 billion in bailout funds approved by Congress dedicated to saving troubled banks, lawmakers are shifting their attention to troubled homeowners in hopes of stemming an expected new rush of foreclosures.
Senate Republicans last week were seeking as much as $300 billion in new subsidies to help homebuyers, and Democrats wanted at least $50 billion to attack the spreading foreclosure problem.
The new Obama administration was also preparing its own foreclosure prevention program that was expected to cost as much as $100 billion.
Among the proposals being considered are a $15,000 tax credit for homebuyers. Current law provides first-time homebuyers with a $7,500 tax credit.
In addition, the so-called cramdown provision, which would enable at-risk homeowners to ask a bankruptcy court to restructure their mortgage, is moving its way through both the House and Senate, with the support Democratic leaders.
The cramdown provision, according to NAFCU President Fred Becker, couldn't come at a worse time for credit unions, which are struggling with the prospect of a $5-billion premium to recapitalize the National CU Share Insurance Fund in order to finance a rescue of the corporate credit union network. It also comes as hundreds of credit unions are reporting losses for 2008, many for the first time.
If the cramdown provision passes, according to Becker, it will require credit unions to set aside increasing loan loss reserves, exacerbating the pressures on the financial condition.
