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House could vote this week on cramdowns
WASHINGTON (2/23/09)—The House is expected to vote on a mortgage “cramdown” bill this week and, though changes are expected, Credit Union National Association (CUNA) Vice President of Legislative Affairs Ryan Donovan said Friday it is likely still be unpalatable to credit unions and other lenders. The House vote would come at the same time more than 4,200 credit union representatives are gathered in Washington, D.C. for the 2009 CUNA Governmental Affairs Conference (GAC). The GAC kicked off Sunday and continues through Thursday. CUNA President/CEO Dan Mica issued a statement Friday following news that the “Helping Families Save their Homes in Bankruptcy Act” would reach the House floor by the middle of this week. The bill would make changes in the Bankruptcy Code, including allowing judges to change the terms of existing mortgages, and action known as a “cramdown.” “CUNA opposes HR 200 – or any similar bill – which forces credit unions to accept a lower principal on a mortgage loan by the bankruptcy court. “This measure is overly broad in its application, scope, and duration as it applies to all mortgage loans, unfairly grouping a loan made with strong underwriting standards – such as those made by credit unions -- with a loan made in an unscrupulous manner,” the CUNA leader said. He added, “Credit unions acknowledge that bankruptcy is a legitimate option for eligible borrowers who have no other way to address their indebtedness. We believe that the Bankruptcy Code must fairly balance the rights of both credit grantors and borrowers, and it must recognize the impact that bankruptcy has on the cost of credit to borrowers who do have the ability and determination to repay their obligations. “This legislation does not meet that test.” CUNA’s Donovan added that the situation surrounding the bill remains fluid, and how this issue will be brought to the House floor, and with what other concerns it may be paired, could change. "There is a very real possibility that the cramdown bill will be combined with our deposit insurance bill [H.R. 786] and other legislation that CUNA supports," Donovan said. Even still, Donovan speculated that CUNA would continue to strongly oppose the legislation unless significant modifications are made. "I am not sure that there are very many folks who would consider the prospect of mortgage cramdown and the opportunity to make permanent the increased deposit insurance coverage as equal in importance," Donovan said. He added, "We will be encouraging opposition to the cramdown bill in the House and asking our legislators to bring the deposit insurance bill up as a stand alone measure."


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