Mortgage reforms, cramdowns in reg reform?

Dec. 8, 2009 – Measures for first-mortgage standards and a proposal for mortgage cramdown authority could make it into a package on financial industry regulatory restructuring this week.

The House Rules Commitee begins two days of meetings today on the draft of H.R. 4173, the Wall Street Reform and Consumer Protection Act. Since initially slating action, it has added the House-passed H.R. 1748, which sets standards and disclosures for first mortgages, to its discussion agenda and has received a proposed amendment from House Judiciary Chairman John Conyers, D-Mich., and others seeking to include mortgage cramdowns as well.

NAFCU continues to oppose cramdowns involving mortgages issued by credit unions, which avoided the types of subprime lending that led to the mortgage meltdown and today's economic crisis.

As passed in May, H.R. 1738, the mortgage reform bill, includes includes NAFCU-sought provisions extending a safe harbor for credit unions and other lenders meeting certain minimum requirements in their mortgage lending practices. The bill is aimed at preventing the kinds of loans that have helped fuel today’s foreclosure crisis.

Today, the House Financial Services Committee holds a hearing on the private-sector and government responses to the foreclosure crisis. The hearing could provide support for including H.R. 1728 in the broader industry reform bill. Among the many witnesses is Julia Gordon, senior policy counsel for the Center for Responsible Lending.

While set to hold a second meeting on H.R. 4173 Wednesday, the Rules Commitee could still send the package to the House floor later that day. The six titles already incorporated address the proposed Consumer Financial Protection Agency, systemic risk oversight, executive compensation, over-the-counter derivatives, capital markets and insurance.

NAFCU continues to press for excluding credit unions from CFPA oversight, noting that credit unions’ consumer practices should be the supervisory responsibility of NCUA. It also wants to ensure that no credit union – not even three largest, which are affected by the current proposal – is required to pay for the wind-down of non-bank firms.