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Washington
CUNA warns bankruptcy deal has unseen pitfalls
WASHINGTON (12/13/07)—Almost 500 credit unions, representing 36% of all credit union assets, could be adversely affected by a “manager’s amendment” to a mortgage bankruptcy bill that was scheduled for mark up Wednesday by the House Judiciary Committee, warned the Credit Union National Association (CUNA) Wednesday. In a letter to the committee chairman, Rep. John Conyers (D-Mich.), CUNA urged lawmakers to tailor the bill’s broad definition of “non-traditional mortgages” so that carefully underwritten credit union loans are not treated the same as the questionable subprime loans that have caused an upheaval in the subprime and mortgage markets. CUNA said that if such a modification were made, it could support the manager’s amendment to H.R. 3609, the Emergency Home Ownership and Mortgage Equity Protection Act. Under the provisions of the bill, loans falling under the definition contained in the bill could be subject to modification of terms by a bankruptcy judge. “This would impact almost 500 credit unions that have made ‘interest only’ loans in good faith and in response to member requests," CUNA wrote. "These are not subprime loans, but rather loans which were rigorously underwritten with full and clear disclosures. “Members of credit unions in housing markets such as California found these types of loans were necessary to allow them to purchase what, in many cases, would be classified as ‘starter homes.’" CUNA also told Conyers that credit unions appreciate the fact that the manager’s amendment includes provisions that indicate the bill will only apply to mortgages made within a defined time period and bankruptcy courts would only be able to use this temporary authority for seven years. "During our meetings with your staff, we indicated our flexibility with regard to the time period chosen to define loans subject to modification in bankruptcy," CUNA wrote. "Therefore, we can support the January 1, 2000-to-date-of-enactment period specified in the manager’s amendment. These provisions should address concerns about the potential long-term adverse effects of the legislation."


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