NAFCU Board Votes to Publicly Oppose Cram-Down

Posted April 22, 2009 at 11:29am

After weeks of negotiations, the National Association of Federal Credit Unions’ decision to oppose language in a bill that would give bankruptcy judges the power to modify mortgages is the first public sign that a compromise on the cram-down provision may be further off than expected.

The board of the NAFCU voted unanimously Tuesday to oppose the revised mortgage bankruptcy provision. The trade group, which represents federal credit unions, sent a letter to Sen. Dick Durbin (D-Ill.) and the entire Senate announcing its opposition on Wednesday.

“We believe that a more targeted approach is better suited to address the issue, and are pleased that the discussions with your staff on this matter have proceeded along such lines,— NAFCU president Fred Becker wrote.

However, the NAFCU said it opposes the compromise legislation because information regarding work-out plans for subordinate liens as well as how the new legislation would impact existing Private Mortgage Insurance contracts has not been made available.

Durbin’s staff worked heatedly over the recess to try to forge a compromise with banks and credit unions.

Representatives from the Credit Union National Association, the NAFCU, the Independent Community Bankers of America, Wells Fargo, Bank of America and JPMorgan Chase & Co. met with Senate aides over recess.

Durbin’s spokesman Max Gleischman did not immediately return an e-mail and call.

Durbin’s staff has been pressing the credit unions and banks to endorse the principles they laid out in a one-page memo.

So far, the NAFCU is the only participant of the negotiations to publicly oppose the Durbin package.

CUNA is expected to support the agreement, according to several financial services lobbyists, but so far, the trade group has not publicly come out in favor of the legislation.

“We are still negotiating,— said CUNA spokesman Pat Keefe in an e-mail. “[It’s] no time to walk away; too much at stake for credit unions.—