House, Senate tackle cramdown, omnibus

A broad housing bill set for a House vote this week has triggered a strong lobbying push by the financial-services industry to limit one of its most contentious provisions before it heads to the Senate.

The provision, known as “cramdown” in the financial-services industry, would empower judges to write down the interest payments and principal of home mortgages for primary residences and extend the payment period.

{mosads}The vote was postponed last Thursday after centrist Democrats, including New Democrats and Blue Dogs, said the provision was too broad. Minor tweaks have been made since then, but not to the satisfaction of the banking lobby, which wants the measure to apply only to  risky mortgages and to ensure that courts are a last resort.

President Obama has broadly supported cramdown, but said that it should be a last resort to reduce the stress in the housing market and curb the number of home foreclosures.

A vote scheduled for Tuesday is likely to be delayed until Housing and Urban Development Secretary Shaun Donovan has the chance to brief the Democratic Caucus, where House liberals and left-leaning groups say “cramdown” is a necessary stick to force lenders to adjust mortgages. A previously scheduled briefing on Monday night was delayed.

The issue has garnered a flurry of interest from lobbyists downtown who say the provision would further hurt financial markets and who want to limit the measure as much as possible in the House.

The industry is already looking ahead to further restrict the bill in the Senate.

A Senate Democratic leadership aide said the chamber would try to take up the issue in the next two weeks and definitely before the Easter recess.

The last time a cramdown amendment came up in the Senate, in April 2008, it was tabled by a vote of 58 to 36, with 11 Democrats voting in favor. The amendment was sponsored by Senate Majority Whip Dick Durbin (D-Ill.).

On Thursday, Durbin said that he was willing to negotiate on a broad cramdown provision and might support limiting its impact again to subprime and riskier mortgages. Durbin has since said that he is not in favor of limiting the provision in such a way, but his comments last week “kicked up a lot of dust” downtown, according to one financial industry lobbyist.

“It was very encouraging, from where we sit,” said Francis Creighton, vice president of legislative affairs at the Mortgage Bankers Association. “It shows people [are] willing to negotiate and get to a place where we can, if not support the bill, then at least be a little more comfortable.”

Credit unions, community banks and larger financial institutions have mostly been on the same side of the issue.

{mospagebreak}“We hope to further limit it to the bad actors out there” and have it be focused on lenders who approved riskier mortgages, said Dan Berger, senior vice president of government affairs at the National Association of Federal Credit Unions.

“It’s really the smaller financial institutions that have had the most political impact,” said a financial-services source.

The Senate, meanwhile, will spend the week debating the $410 billion omnibus spending measure, which would fund the federal government after March 6 and has been a target of complaints from Republicans for the number of earmarks it includes, as well as for its overall size.

{mosads}The White House has indicated it will sign the bill, in part out of its desire to move on to the other sweeping reforms it has proposed. White House Chief of Staff Rahm Emanuel on Sunday called the bill “last year’s business.”

Amendments to the omnibus measure were expected this week, including one supported by Alaska’s senators that would make it harder for the Obama administration to overturn a rule, backed by its predecessor, relating to polar bears and climate change.

After deciding that the polar bear was a threatened species, the Bush administration also decided that the Endangered Species Act (ESA) could not be used to regulate carbon dioxide emissions. Polar bear populations are declining in part because Arctic ice is melting due to the warming planet. Some environmental groups want to leverage the ESA protections to curb carbon emissions from power plants and other polluters.

The amendment support by Sens. Lisa Murkowski (R-Alaska) and Mark Begich (D-Alaska) would require the Interior and Commerce departments to follow a normal public comment period before reversing the Bush rule.

“The underlying policy goal at issue here — using the Endangered Species Act to regulate climate change — is far too important a matter to be decided without debate as a non-germane portion of an appropriations bill,” Begich wrote Senate Appropriations Committee Chairman Daniel Inouye (D-Hawaii) last week.

Appropriations lobbyists were hoping the amendments would be kept to a minimum so that reconciliation with the House-passed version would be easier. A continuing resolution has kept the government operating for the past few months, but lobbyists said clients were still awaiting passage of the omnibus so that they could submit applications for the grants and loan programs it would fund.

“It’s been a curveball. And then another curveball. And then another delay,” said one appropriations lobbyist.