October 5, 2012
Sen. Jeff Merkley (D-Ore.) addressed a crowd of credit union professionals during Thursday morning’s Northwest Credit Union Association (NWCUA) Convention general session, touching on his support for expanding credit unions’ member business lending capacity and outlining his plan for rejuvenating the housing market.
Merkley said he got his introduction to credit unions while studying abroad as a teenager. His “host dad” had founded a credit union with several friends and neighbors, and they used their collective assets, which were kept in a coffee can, to issue micro-loans, usually for as little as a few dollars.
“It was my first introduction to the notion of member-based credit unions and also to micro-loans,” Merkley said, “which became a huge, huge factor in economic development around the world. And so, I think sometimes about the relationship, and you’ll hear somebody making a pitch, and the response will be, ‘You had me at hello.’ Well, the credit unions had me at the coffee can.”
Merkley reaffirmed his support for the Small Business Lending Enhancement Act, which would raise the credit union member business lending (MBL) cap from 12.25 percent of assets to 22.5 percent.
“The Small Business Lending Enhancement Act—or I think you also call it MBL,” Merkley said. “Let’s get that done! Harry Reid has promised a vote on it, and I have personally spoken to him about it.” He went on to credit the work of Sen. Tom Udall (D-Colo.) and of credit unions’ political advocates.
“I think this lame duck session does present an opportunity to get that vote accomplished,” Merkley said, referring to the Senate vote promised by Senate Majority Leader Harry Reid. “It’s one thing to have a promise, but the promise has to be converted into the actual moment. So, I’ll be with you, and I’ll continue to raise that with Harry Reid.”
Merkley also discussed an ambitious plan to stimulate the economy by establishing a short-term program to facilitate the refinancing of underwater mortgages—mortgages for homes now worth less than the amount owed. When consumers refinance loans, they take out a new loan with new terms to pay off the old loan. When a loan is under water, it is impossible to refinance, as the consumer cannot collateralize a new loan for the full amount owed.
Merkeley's proposal is to set up a trust that he compared to Franklin Roosevelt’s Depression-era programs. This trust would buy bonds at cost and then offer each underwater homeowner one of three refinancing options:
- Shortening the life of the mortgage but keeps monthly payments fairly consistent;
- Cutting monthly payments by issuing a new full-length loan at a lower interest rate; or
- Cutting monthly payments by extending the life of the existing loan.
“The result of that modeling is that these families who have made their payments through thick and thin, they are good credit risks,” Merkley said. “This would not only refinance these families, but it would make money for the American taxpayer. So, we should do it!”
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