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Boehner: Cramdown will lead to uncertainty for CUs

WASHINGTON (2/26/09)—A mortgage cramdown bill expected to be voted on today could lead to uncertainty for credit unions as mortgage lenders, according to Rep. John Boehner (R-Ohio).

Speaking to a group of credit union representatives at the Credit Union National Association's (CUNA) Governmental Affairs Conference Wednesday, Boehner—a lifelong credit union member—outlined the reasons why the mortgage cramdown bill would be detrimental to credit unions.

Mortgage cramdown—which allows bankruptcy judges to modify the terms of a struggling homeowner's existing mortgage—would increase interest rates, Boehner said.

"[Cramdown] would lead to lower liquidity in a time when we need more liquidity," he said.

Boehner briefly discussed mortgage cramdown as a method that was used "for a reason more than 100 years ago to keep interest rates low and keep liquidity in the market."

However, cramdown is now an outdated method, and could allow judges "to do almost anything" with mortgages if the bill if passed, he said.

Rep. Eric Cantor (R-Va.) echoed similar thoughts during a later speech. Cramdown "does not make sense," and will "make it more difficult for you to provide members with credit," he told credit unions.

CUNA opposes mortgage cramdown because it believes it could lead to borrowers' gaming of the lending system. An unsatisfied homeowner could stop payments on a home and still keep it, CUNA has said.

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