"Mortgage Cramdown" - Thumbs Up? or Thumbs Down?

by Ron Daly 

Well it looks like the “Cramdown", a new bill that would allow bankruptcy courts to change the terms of a mortgage on a primary residence, is picking up steam in Congress. It's cleared the House Judiciary and is going to get a vote from the House sometime soon. That vote is expected to pass according to this story from the Credit Union Journal (click here to read).

MarketWatch put out an article explaining some of the finer points of the legislation in depth – the one that caught my eye:

Unknowns include the final language of the legislation, how the risk of bankruptcy cramdowns will affect the pace and degree of loan modifications and what type of increased incentive the new law might provide for borrowers to declare bankruptcy. 

(from MarketWatch - Click here for full article)

If you’re not familiar with the issue, we had a blog post a while back titled “Most Banks and CUs are Against the "Cramdown" (click here to see our story). Both NAFCU and CUNA have come out against the Cramdown legislation. Most recently, CUNA has asked that credit union members across the nation contact their Congressmen and Senators to oppose a provision in the Senate and House stimulus package that would allow bankruptcy courts to change the terms of mortgages. 

On the other side of the aisle, we see the American Bankers Association, the Mortgage Bankers Association and the American Securitization Forum have all issued statements against the same piece of legislation, according to the Washington Post (click for the full story). 

I heard there is a call to action in some of the CU State Leagues and a website for members and CU Professionals to go to? Anyone know what it is? Or care to comment on their position, or what credit unions’ position should be on the legislation?

While you're at it, why not post a comment to the new TownHall Meeting Page, "Under My Administration", too? Click here to tell the folks in charge what they should keep in mind about Credit Unions. 

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Comments

[Bill Cook]

Ron, thanks for the great overview of this critical issue. CUNA and the Virginia Credit Union League are urging everyone to write their congressmen. Both provide a painless way to contact your legislators:

If you live in Virginia visit: http://www.mycuisme.com/

CUNA's site is http://capwiz.com/cuna/home/

Please let Congress know that HR 200 and S 61 will hurt credit unions at a crucial time when we are trying to help our members.