WASHINGTON – Credit unions have been pretty-much shielded from the affects of this week’s House debate on combining as many as seven financial reform bills into one – but are wary of the return of the cramdown issue, which would open the mortgage foreclosure process to the bankruptcy courts.
Lawmakers are expected to propose adding the cramdown provision to the omnibus financial services bill, which will combine the efforts to create a Consumer Financial Protection Agency, a systemic risk regulator, regulate Wall Street rating agencies, set new rules on financial derivatives and combine banking regulators, among other things. "We expect the Judiciary Committee to propose an amendment on cramdowns," Ryan Donovan, senior lobbyist for CUNA, said yesterday.
The cramdown provision has been debated for the past two years in both the House and Senate but has so far been turned back, due in large part by an avid lobby by banks and credit unions. It would allow at-risk homeowners to ask a bankruptcy court for the first time to amend the terms of their mortgages, requiring in most cases, the lender to take a haircut.
Supporters of the measure have bided their time and see a worsening of the mortgage foreclosure numbers as a good opportunity to bring the issue back for consideration. Otherwise, NAFCU and CUNA have succeed in limiting the effects of the financial reform bill on credit unions, by getting an exemption for credit unions from fees to fund a systemic risk regulator. In addition, House leaders are ready to push a proposal that would exempt all credit unions under $10 billion (there are only three credit unions above that size) from being examined by the new consumer agency.
