Friday, February 27, 2009

Vote on mortgage bankruptcy bill delayed

WASHINGTON (2/27/09)—The U.S. House of Representatives postponed its scheduled consideration of H.R. 1106 Thursday and pushed back substantive debate and a vote until probably next week.

The bill contains a provision strongly opposed by the Credit Union National Association (CUNA) that would allow bankruptcy court judges broad authority to change terms of existing mortgages. That practice is commonly referred to as a mortgage "cramdown."

The bill, however, also carries language that would make permanent the higher federal share and deposit insurance cap of $250,000 enacted on a temporary basis in October as part of the Emergency Economic Stabilization Act.

The favorable insurance provision appears to remain on track, according to CUNA Vice President Ryan Donovan. But, he said, the negative message on cramdowns, delivered while 4,200 credit union representatives were in town for CUNA's 2009 Governmental Affairs Conference (GAC), may have slowed the track for that plan.

"From a credit union perspective," Donovan said Thursday, "getting the House to put the brakes on is a positive development."

Earlier this week, CUNA sent a letter to each member of the House to urge changes to the proposed cramdown authority, which CUNA said is "overly broad in scope, application and duration."

CUNA supports other provisions of H.R. 1106, which includes measures that would help families stay in their homes, including improvements to the Hope for Homeowners programs and a safe harbor for lenders that modify certain types of mortgages.

CUNA encouraged lawmakers to consider amendments that would limit the application of the bill's cramdown proposal to the subprime and nontraditional mortgages that caused the housing crisis and that would provide a firm sunset on the authority conveyed to the bankruptcy courts through this legislation.

The letter also reiterated CUNA's strong support of the permanent extension of the $250,000 deposit insurance limit, as well as language which would allow the National Credit Union Administration (NCUA) as much as five years to replenish the National Credit Union Share Insurance Fund (NCUSIF) when the fund drops below the statutorily required level.

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