WASHINGTON — Credit unions and other financial institutions were dealt a setback last week when the House Judiciary Committee last Tuesday approved a bill giving judges the power to reset the terms of mortgages for people in bankruptcy proceedings.Although the measure includes some improvements backed by credit unions and other financial institutions-including a provision requiring homeowners to share the proceeds with the lender if they sell the property within five years-lobbyists for both CUNA and NAFCU said they still opposed it.Both groups said that the measure would punish credit unions even though they did not engage in many of the practices that caused the current housing crisis. They also say it could hurt credit unions by reducing their assets. "We are pleased [Judiciary Committee] Chairman [John] Conyers is open to a discussion of our concerns, but we think the bill as written is bad for credit unions and hurts their ability to serve members," said NAFCU Director of Legislative Affairs Brad Thaler.The bill would allow judges hearing the cases of people who file for Chapter 13 bankruptcy to rewrite the terms of mortgages, the so-called cram-down.The panel, which voted for the measure 21-15, adopted an amendment requiring homeowners to contact their lenders at least 15 days before filing for bankruptcy. While that was strongly backed by credit unions, lawmakers rejected another amendment that would have limited the provision to subprime and other nontraditional loans.The absence of that exemption is a key obstacle in getting credit unions on-board, said CUNA Vice President for Legislative Affairs Ryan Donovan."Institutions that used strong underwriting standards when making loans shouldn't have to be punished," he said.Donovan added that the measure could be changed as it goes through the legislative process and as a means to pick up Republican support (no Republicans supported it in the Judiciary Committee) on the House floor and in the Senate. If lawmakers were to subsequently limit it to subprime and related loans, CUNA would "look closely at the new version."–[email protected]