WASHINGTON – The House approved the bill last night to authorize bankruptcy courts to restructure troubled home mortgages, over the objections of the credit unions and banks, sending the so-called cramdown measure on to the Senate.
The House version, however, was eased somewhat by provisions that will give credit unions and other lenders a piece of any profits made on the sale of crammed-down properties and making interest rate reduction, and not a cramdown of the loan principal, the main priority of the bankruptcy courts.
The bill also included key provisions for credit unions that will make the $250,000 coverage on federal deposit insurance permanent, and more important, allow NCUA to stretch out the $5 billion assessment to pay for the corporate credit union bailout as long as five years.
NAFCU President Fred Becker said his group will continue to lobby the Senate to limit the scope of the cramdown bill to subprime and other non-traditional mortgages.
"While the changes in the House represent a step in the right direction, we have concerns that this legislation would still give bankruptcy judges broad cramdown authority on mortgages," said Becker, after the vote. "Going forward, we will continue to work with members of the Senate to secure more moderate measures to help homeowners and minimize the negative impact on credit unions."
