MBA Opposes Citi Deal on Cramdowns

The Mortgage Bankers Association and the Financial Services Roundtable strongly oppose the bankruptcy "cramdown" deal Citigroup stuck Thursday with key Democratic senators. "We remain opposed to bankruptcy cramdown legislation because of the destabilizing effect it will have on an already turbulent mortgage market," said MBA chairman David Kittle. During negotiations, Sen. Dick Durbin, D-Ill., agreed to limit his bill so that bankruptcy judges could only reduce or cram down the amount of existing mortgages -- not new loans originated after enactment of the bill. "The compromise changes are a first step to improve the bill, but the Durbin bill is still far too broad and presents a serious risk to the mortgage markets," said Roundtable senior vice president Scott Talbott. MBA wants the bankruptcy provisions limited to subprime loans (2005- 2007 vintages) along with a specific exemption for Federal Housing Administration and Department of Veterans Affairs guaranteed loans.