NAFCU, Consumer Groups & Congress Strike 'Workable Solution' on Mortgage Bankruptcy Reform

WASHINGTON, Dec. 11   /PRNewswire-USNewswire/ -- Today, a compromise sought by the National Association of Federal Credit Unions (NAFCU) over H.R. 3609 was approved in principle by a number of interest groups and members of the House Judiciary Committee.  It is expected to be offered as part of a manager's amendment at mark-up tomorrow.

NAFCU has been instrumental in advancing the industry's concerns on the mortgage bankruptcy bill, H.R. 3609, in the hopes of limiting the impact of any mortgage bankruptcy bill only to subprime, non-traditional loans.

While NAFCU believes it is still not a perfect bill, the adoption of this compromise is a significant step forward as it presents what we believe is a workable solution.

"NAFCU has been working intensely with members of Congress and their staff to ensure that in their desire to find a solution for the subprime situation, they don't throw the baby out with the bathwater.  Discussions over the last week, through the weekend and even last night by NAFCU lobbyists, the Center for Responsible Lending, and Judiciary Committee staff have brought about this compromise.  We are delighted to have come to this compromise which affords consumers welcome relief from possible foreclosure but still protects the majority of credit union loans," said NAFCU President Fred Becker.  He added, "At a time like this, the last thing we want to do is make credit harder to come by when people need it most."

H.R. 3609 would allow homeowners to avoid foreclosure by filing for a mortgage restructuring under Chapter 13 of the bankruptcy code. The provision would allow bankruptcy court judges to revise the interest rate, remaining value and maturity of the loan. The compromise on H.R. 3609 also would limit the mortgage bankruptcy option to existing sub-prime or non-traditional loans that are in foreclosure, or those at least 60 days in arrears.

Under the agreement, the definition of a "non-traditional" loan would come from federal regulators' subprime mortgage guidance, which applies the term to interest-only mortgages and adjustable-rate mortgages with payment options that can lead to negative amortization. Such loans typically are not provided by credit unions.  The subprime definition is taken from language passed by the House in H.R. 3915.

The committee had postponed earlier mark-ups in part due to the concerns expressed by NAFCU and other industry groups.

NAFCU is the only national organization that focuses exclusively on issues affecting federal credit unions, representing its members before the federal government and the public. For more information, visit http://www.nafcu.org/.

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Fred Becker

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National Association of Federal Credit Unions