Key Senator Rejects Credit Union Compromise On Cramdowns

Credit Union Journal
March 19, 2009 | COMMENTS

The Senate appeared ready yesterday to delay a vote on the so-called cramdown bill for several weeks after an important senator rejected a compromise backed by credit unions that would limit the measure to subprime and other non-traditional mortgages.

Sen. Charles Schumer, who personally lobbied CUNA and NAFCU for their support last Friday, said the compromise supported by the credit union lobby falls short of the goals of the bill's sponsors because it would only cover half of troubled mortgages.

Schumer and the bill's chief sponsor, Sen. Dick Durbin, the Illinois Democrat, met yesterday with representatives of CUNA and NAFCU, as well as the American Bankers Association, J.P. Morgan Chase and the Center for Responsible Lending, a credit union-backed consumer lobby, to try to work out a deal on the bill, according to one lobbyist who was present.

But the bill, which would allow bankruptcy courts to restructure troubled mortgages, is still opposed by Senate Republicans, who 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 pass the House two weeks ago on a narrow partisan vote, with most House Republicans opposed.

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.

This article appeared at www.cujournal.com and is reprinted with permission.