Congress gave credit unions some good news last week.
The House kept the lending ceiling of the Central Liquidity Facility at $41.5 billion, which the NCUA and the trade associations fought hard to maintain.
That chamber also postponed a vote on a measure strongly opposed by CUNA and NAFCU that would have allowed bankruptcy judges to rewrite the terms of mortgages.
Before the CLF ceiling was raised by Congress last fall it was $1.5 billion. It was created by Congress in 1979, and the Treasury Department is authorized to lend it up to $500 million if it is determined that the facility doesn't have enough money to meet the liquidity needs of credit unions.
The provision on the CLF was included in a $410 billion measure to fund the operations of the government through September. It passed the House 245-178 last Wednesday and could be voted on in the Senate this week.
Most opponents to the overall measure complained about its high costs and the fact that it contained earmarks for lawmakers' pet projects. The CLF provision was not considered to be controversial.
By contrast, the mortgage bankruptcy provision-also known as cram-down provision-was extremely controversial. Some moderate Democrats raised concerns about it during a meeting of the House Democratic Caucus on Thursday morning, several hours before the House was scheduled to vote on it.
"We encouraged them to look at the unintended consequences of permitting this to happen," said CUNA Vice President of Legislative Affairs Ryan Donovan. "It will add costs to existing because there is greater risk to the lender."
Donovan said many of the credit union executives and volunteers who met with lawmakers and aides during visits on Capitol Hill the day before the scheduled vote as part of CUNA's Governmental Affairs Conference raised concerns about the provision as well.
NAFCU Senior Vice President Dan Berger was pleased with the House's delay and said his association would work to "limit the scope of the cram-downs, especially for institutions that didn't cause the mortgage crisis."
The moderate Democrats, many of whom supported the credit unions' position, are a group of 67 House members who often take fiscally conservative or pro-business positions.
The cram-down provision was part of a bill that credit unions mostly like because it contains provisions giving them five years to replenish the NCUSIF, made permanent deposit insurance coverage up to $250,000 per account, and increased the NCUSIF's borrowing authority from $500 million to $6 billion. That figure hasn't been adjusted since the founding of the fund in 1971.
CUNA and NAFCU supported amendments to limit cram-downs to subprime and non-traditional mortgages, permit lenders to recover the net proceeds of the sale of a home up to the amount of the cram-down plus the outstanding amount of a loan sold within seven years, sunset the cramdown provision after five years, and require a means test regarding ability to repay the existing mortgage.
The Senate seems more receptive to the arguments of credit unions on cram-downs.
"It will be tough to get the cram-down provision through," Senate Banking Committee Chairman Christopher Dodd (D-Conn.) said in a brief interview with Credit Union Times following his speech at CUNA's GAC. "People are concerned about foreclosures. But I am not sure the 60 votes are there."
The Senate's main sponsor of cram-downs, Senate Majority Whip Richard Durbin (D-Ill.) indicated he was open to a compromise on the measure.
–cmarx@cutimes.com

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