A compromise sought by the National Association of Federal Credit Unions (NAFCU) over H.R.3609 was approved in principle by a number of interest groups and members of the House Judiciary Committee. According to NAFCU, the compromise is expected to be offered as part of a manager's amendment at mark-up.
H.R.3609 would allow homeowners to avoid foreclosure by filing for a mortgage restructuring under Chapter 13 of the bankruptcy code. The provision would allow bankruptcy court judges to revise the interest rate, remaining value and maturity of the loan. The compromise on H.R.3609 also would limit the mortgage bankruptcy option to existing subprime or nontraditional loans that are in foreclosure, or those at least 60 days in arrears.
Under the agreement, the definition of a nontraditional loan would come from federal regulators' subprime mortgage guidance, which applies the term to interest-only mortgages and adjustable-rate mortgages with payment options that can lead to negative amortization. Such loans typically are not provided by credit unions.
NAFCU says its aim is to limit the impact of any mortgage bankruptcy bill only to subprime, nontraditional loans. While the organization believes H.R.3609 is still not a perfect bill, it considers the compromise ‘a significant step forward.’