WASHINGTON-Representatives of CUNA and NAFCU were lobbying lawmakers last week to limit the potential impact of the mortgage cramdown bill.
The heads of the two trade associations received separate phone calls the week before from Sen. Charles Schumer, who has been a key player in bankruptcy legislation for the past few congresses.
The New York Democrat, who has been pushing a bill to lift the member business loan cap, offered to both CUNA President Dan Mica and NAFCU President Fred Becker to attach the MBL provision to the cramdown bill if the two lobbying groups agreed to reverse their opposition to the cramdown bill.
The lifting of the MBL cap, which was set at 12.25% (of assets) as part of HR 1151, the 1998 CU membership Access Act, has long been sought by credit unions, with at least a half dozen unsuccessful legislation proposals addressing the issue since then.
But both executives balked at the offer. "He wanted me to consider or think about the bankruptcy bill with member business lending attached to it," said Becker. Becker told the New York Democrat NAFCU would support the bill only if it were limited to subprime loans, which is what they agreed to last year. But he said NAFCU will not support the cramdown bill in its current form, which applies to all mortgages.
The credit union lobby has been ardently opposed to the cramdown bill, insisting it would cause greater havoc in the mortgage market at a time when credit unions, especially in the Sand States of California, Arizona, Nevada and Florida, are struggling with heavy losses on home loans.
Last week, a representative of CUNA met with Schumer and Illinois Sen. Richard Durbin, the chief sponsor of the cramdown bill, along with other lobbying representatives, to discuss a compromise on the bill. Both Schumer and Durbin made it clear they will not support language to limit the cramdown bill to subprime and other non-traditional mortgages. But the group appeared to be moving towards another compromise that would limit those allowed to have the bankruptcy courts amend their mortgages to those with the heaviest income-to-debt burdens.
Also at the meeting were representatives from the American Bankers Association, J.P. Morgan Chase, the Center for Responsible Lending, a credit union-backed consumer lobby, and another consumer group.
The two senators were seeking compromise because it appears they lack the votes to pass the measure, which is still opposed by Senate Republicans. The Republicans said they are convinced it would cause greater havoc in the already troubled mortgage market. A handful of Democrats are also wavering, prompting Schumer to reach out to the powerful credit union and bank lobbies.
The bill passed the House three weeks ago on a narrow partisan vote, with most House Republicans opposed to it.
The ploy by House leaders to attach the bill to one making permanent the $250,000 limit for federal deposit insurance coverage, has failed to attract enough support from the credit unions and banks, which are allied in their opposition.
Making it more difficult for credit unions is a provision also attached that would allow NCUA to stretch out the $5-billion assessment to pay for the corporate credit union bailout for as long as five years.
In addition, CUNA is hoping to get a measure attached that would give corporate credit unions direct access to the emergency loan fund, the Central Liquidity Facility, and to allow the CLF to infuse capital into both corporates and natural person credit unions.
