Last week the Senate passed a housing bill that is good for credit unions. It contains two critical legislative provisions for our industry. And just as important, it did not contain a provision on mortgage cram-downs.
The Senate bill contains language we need enabling the NCUA to establish the Corporate Credit Union Stabilization Fund, allowing the agency to set repayment of stabilization costs over as many as seven years. It also makes permanent the $250,000 federal share and deposit insurance limit.
And most importantly, the Senate-passed bill does not give bankruptcy judges the authority to cram down mortgages. The cram-down amendment, if it had passed, would have further exacerbated credit union losses at a time when we are already being challenged by the current economic downturn. Some of my colleagues in places like Florida, Arizona, Nevada and California have told me cram-downs could be devastating for them. And cram-downs have the potential for playing havoc in the mortgage market and ultimately increasing the cost of mortgage loans to consumers.
I know there were a lot of questions about whether NAFCU or CUNA had the right approach. From what I understand, CUNA negotiated in good faith and joined with some of the nation's biggest banks in agreeing to support a set of cram-down principles. NAFCU also negotiated in good faith but found that it could not sign onto the principles and publicly stated as much.
As a CEO of a credit union, I do not know whether CUNA or NAFCU had the right approach. In fact, it is probably unknowable. But given the positive results, I'm thankful that they both acted exactly as they did. Sometimes the best approach is to stay at the negotiating table and continue talks. And sometimes the most effective approach by far is to reject compromise and leave the table. Who can say which approach carried the day here? Perhaps both approaches complemented each other to get us the result we needed.
As I noted, cram-downs, unless applied to just subprime or Alt-A mortgages, would have an adverse impact and our industry, one that we simply cannot afford.
The bottom line is that both NAFCU and CUNA negotiated in good faith and represented me well-in the end, protecting my credit union and our industry from the certainty of cram-downs. We got what we needed in the Senate bill, and now we can focus on the next steps.
As I think back, this is not the only time the trades have taken different tactics that served to protect our industry. Nevertheless, there was a lot of talk then about who did what.
In 2000, as I recall, CUNA joined the ABA, the Financial Services Roundtable and others as part of the bankruptcy coalition to help pass bankruptcy reform. Who can fault them for that? Nevertheless, we all know that when groups join coalitions, compromises are a given, and the bankruptcy coalition compromised on reaffirmations. NAFCU, however, chose not to join the coalition and as a result was able to just say no to what would have been a significant diminution in the ability of credit union members to reaffirm their debts following bankruptcy.
As was the case with cram-downs last week, our industry was again protected. In fact, as I think about it, my dues to both trade groups have been paid in perpetuity as a result of their efforts to preserve reaffirmations and stop cram-downs.
Let's put aside the bickering about which trade chose the right approach. Let's look, instead, at the results our two trade associations are able to achieve. Both are serving us very well, and I find that quite remarkable.

Instant Insights /

Trades' Different Tactics Earned the Right Result on Cram-Downs

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