Financial groups push back on 'cramdown' mortgage measure

Financial industry groups are launching a broadside against an amendment to financial overhaul legislation that would empower bankruptcy judges to alter home mortgages.

The industry for years has fought against the policy, which it calls "cramdown", and argues that the change would hamper the housing market's ability to recover. Supporters, including a range of consumer advocacy groups, say it is a necessary shift to force mortgage lenders and servicers to rewrite the terms of mortgages and reduce the foreclosure rate.

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The House earlier this year passed legislation on the bankruptcy provision, but the Senate fell 15 votes shy.

Consumer advocacy groups and labor unions, including the AFL-CIO, are strongly supporting the bankruptcy measure. Americans for Financial Reform, a group of 200 groups, is planning to send a letter on Wednesday in support of the measure.

A wide range of financial industry interests is urging lawmakers to oppose the measure. "These provisions will harm the housing market, increase bankruptcy filings and abuse of the bankruptcy system, and increase the cost and availability of credit for new home buyers and those that want to refinance their mortgages," ten industry groups wrote on Tuesday.

The groups include American Bankers Association (ABA), Financial Services Roundtable, Independent Community Bankers of America (ICBA) and Securities Industry and Financial Markets Association (SIFMA).

The two main lobbying associations for credit unions are also pressing lawmakers to oppose the measure.

"This proposed amendment stands to have a detrimental impact on credit unions and the mortgage market and we cannot support it," the National Association of Federal Credit Unions (NAFCU) said in a letter.

The Credit Union National Association (CUNA) said in a letter that the amendment could lead it to oppose the broader financial regulatory bill.

"We are deeply concerned that consideration of the Conyers amendment could upset the balance that we feel has been achieved," in the overall bill, said Dan Mica, president of CUNA. "And its adoption as part of the legislation would force credit unions to strongly oppose the broader regulatory restructuring bill."