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Royce Cramdown not in CUs interest
WASHINGTON (2/27/09)—Mortgage cramdown is not in credit unions’ best interests, according to Rep. Ed Royce (R-Calif.). Royce commented on a cramdown bill--which was expected to be voted on Thursday but was moved to next week—during a speech at the closing session of the Credit Union National Association (CUNA)’s Governmental Affairs Conference. The bill would allow bankruptcy judges to alter terms of mortgages nearing default. Like several other policymakers who expressed their opposition to the proposed legislation during the conference, Royce said cramdown would lead to higher interest rates. The House delayed its scheduled cohsideration of the bill Thursday. Royce also noted that cramdown would send a message to society that it’s okay to “walk away from contractual agreements.” “Should we allow breach of contract?” Royce said. “There would be adverse consequences in the availability of loans.” Investors would fear putting their money into the market, he added. Credit unions’ conservative lending standards sharply contrast the over-leveraging of other financial institutions. Credit unions are exemplary in their standards, and they know how to treat borrowers, Royce said. Subjecting credit unions to the Community Reinvestment Act (CRA) would be a “grave mistake,” Royce added, and said he did not support mark-to-market accounting. “We need to make sure credit unions are not punished for other’s mistakes,” he said. Credit unions should spread their awareness to Capitol Hill, so legislators understand how much credit unions mean not only to the U.S.—but overseas. “Credit unions work—if it’s in Orange County, Calif., or Cape Town, South Africa,” he said. “The credit union movement brings capital to the communities who need it most.” Overall, Royce said he is confident that credit unions will survive tough economic times. “I know we’re going to get out of this debacle with credit unions stronger, and ready to go out and create economic recovery,” he said.
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