Bill Allows
Servicers to Modify Mortgages and Avoid More Foreclosures, and Recapitalize the Credit Union Deposit Insurance System
WASHINGTON - This afternoon, Congressman Paul E. Kanjorski (D-PA), Chairman of the House Financial Services Subcommittee on
Capital Markets, Insurance, and Government Sponsored Enterprises, will join
President Obama at the White House for the bill signing of the Helping Families
Save Their Homes Act. The legislation
includes two of Chairman Kanjorski's provisions to help people remain in their
homes and protect the viability of their credit unions. Chairman Kanjorski's first provision will work
to stem the increase of home foreclosures by allowing mortgage servicers to modify loans without the fear of legal
action from investors who oppose changing loan terms. His second provision aims to recapitalize the credit union deposit insurance
system to ensure the long-term stability of the credit union system.
"Foreclosures hurt everyone - the
neighbor, the servicer, the investor, and most importantly, the homeowner,"
said Chairman Kanjorski. "My provision
aims to decrease the number of foreclosures nationwide by making it easier for
lenders to take losses earlier in the process, enabling people to stay in their
homes, and preserving our neighborhoods.
By passing this provision, Congress has taken a giant step towards
helping to gain control of the increasing number of foreclosures."
Chairman Kanjorski added, "Furthermore,
without including the language from my credit union stabilization bill, two-thirds of credit unions would have negative earnings in
2009 as a result of the need to rebuild deposit insurance reserves because of
recent losses. But, with the inclusion
of this provision, credit unions will be able to recapitalize over seven years
and continue to provide needed credit to their members, an essential element
which could help to revive the economy during these difficult times."
According
to RealtyTrac, in April 2009 alone there were 98 foreclosures in Lackawanna County;
46 foreclosures in Monroe County; and 28 foreclosures in Luzerne County. The bipartisan Kanjorski loan modification provision
will help to reduce the foreclosures in these counties, throughout Pennsylvania, and around
the country by limiting the ability of disgruntled investors to bring lawsuits
against servicers who modify a mortgage in order to keep a family in a home.
On
February 5, H.R. 788, Chairman Kanjorski's original loan modification bill,
passed in the House Financial Services Committee by a voice vote. The language from this bill was then
incorporated into the Helping Families Save Their Homes Act when the House
first considered the legislation.
Additionally,
just last week, Chairman Kanjorski introduced H.R.
2351, the Credit Union Share Insurance Stabilization Act. The language from his legislation was
incorporated into the Helping Families Save Their Homes Act.
Credit unions
have also been severely impacted by the mortgage-backed securities
industry. Because of recent problems, the
National Credit Union Share Insurance Fund (NCUSIF), the deposit insurance
program for credit unions, lost an estimated $5.9 billion. Current law requires the recapitalization of
the NCUSIF in the year in which the losses occur.
Without this provision, the sizable losses resulting from
the corporate credit union rescue, however, would result in the majority of
credit unions losing money in 2009. Moreover, approximately 225 of the
nation's 7,800 credit unions would fall below limits where they would be deemed
adequately capitalized.
Specifically, the credit union stabilization provisions
would:
- Create
a Temporary Corporate Credit Union Stabilization Fund that would
eventually merge with the NCUSIF after paying for the costs of the recent
rescue;
- Permanently
increase the authority of the NCUA to borrow from the Treasury Department
up to $6 billion (up from the current $100 million limit);
- Provide
short-term emergency authority until December 31, 2010 for the NCUA to
borrow up to $30 billion under certain circumstances and procedures; and
- Allow
the NCUA to establish a restoration plan and period of up to 8 years to
pay back the deposit insurance funds when they fall below desired levels.
At Chairman
Kanjorski's request, the House Financial Service Subcommittee on Financial
Institutions and Consumer Credit is holding a hearing on May 20 to review how
this provision will impact credit unions and how the National Credit Union
Administration will implement the new law.
Yesterday, the
House passed the revised bill by a vote of 367-54
and the Senate passed it by unanimous consent.
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