WASHINGTON – The Senate finally passed a mortgage rescue bill yesterday after debating on the legislation for a week, during which it eliminated a controversial provision that would have allowed troubled borrowers to have a bankruptcy court restructure their home loans.
The measure was opposed by credit unions because it would create long backlogs in the restructuring of millions of troubled mortgages and take the power for restructuring out of the lenders’ hands. “We are opposed to it,” said Brad Thaler, senior lobbyist for NAFCU, which worked to exempt most credit union mortgages from the provision.
As a result, the Senate bill, called the Foreclosure Prevention Act, has very little for credit unions. It would provide new funds for foreclosure prevention counseling, and for states to buy foreclosed homes and to refinance subprime mortgages, while giving people a $7,000 tax credit to buy foreclosed properties.
The bill is expected to be combined with several other bills working their way through Congress that would position the Federal Housing Administration as a source for restructuring subprime mortgages, create new regulations regarding mortgage lending and add new liquidity to the mortgage market.
That’s why Thaler expressed caution regarding the Senate’s action on the bankruptcy provision. “Anything can happen,” he told The Credit Union Journal yesterday of the possibility of the provision to be reborn.
