Senate Defeats Mortgage Bankruptcy Provision
Credit unions won a victory today when the Senate defeated a measure that would have allowed bankruptcy judges to rewrite the terms of mortgages.
The vote was 51-45. The amendment would have applied to mortgages worth $729,000 and less.
The measure was an amendment to a broader housing bill, which includes funds to create a stabilization fund for corporate credit unions. The full bill is currently being discussed.
Credit unions and other financial service providers said allowing judges to rewrite mortgages would harm their ability to manage risk and would raise the cost of lending.
Supporters of the measure said while it should only be invoked as a last resort but was necessary to provide an option for consumers if they could not come to an agreement with their lender to renegotiate the terms of their mortgage.
The battle isn't over. The House passed a bill that includes this provision, so members of the House-Senate conference committee will have to negotiate over whether it will appear in the final version.
CUNA and NAFCU took different approaches when lobbying on the bill.
CUNA participated in the negotiations until almost the end because they wanted to ensure to ensure that any bill did the least possible damage to credit unions.
NAFCU said last week it couldn't support the measure and ended its participation in the negotiations. NAFCU's announcement received considerable publicity and many media reports credited it with helping helped slow some of the momentum for the amendment.