By Anne Flaherty
WASHINGTON (AP) — Negotiations between the banking industry and Senate Democrats on a mortgage relief plan appeared to stall Wednesday after a trade association representing credit unions said it could not endorse the proposal.

The National Association of Federal Credit Unions said in a letter to Illinois Sen. Dick Durbin that it still had questions about Democrats' plans to let cash-strapped homeowners modify their mortgages through bankruptcy proceedings.

Durbin, the Senate's No. 2 Democrat, had been hoping to win industry support before a Senate vote on the matter, which is expected in the next few weeks.

The measure, which has already passed the House, is considered a key piece of President Barack Obama's foreclosure prevention plan. But banks and credit unions have spent millions to lobby against it, contending that the forced easing, or "cram down," of mortgage terms would spur a flood of bankruptcy filings and ultimately drive up mortgage rates.

Credit unions said their loans should be entirely exempt from the proposal, but Senate Democrats wanted to make the law as broad as possible.

Of particular concern to NAFCU was how the law would affect subordinate liens for creditors and private mortgage insurance contracts, which promise to pay creditors if a home goes into foreclosure.

"Without this information, the NAFCU Board of Directors does not believe it can fully and fairly evaluate how this legislation will impact credit unions," wrote Fred Becker, president and CEO of NAFCU, in a letter to Durbin and the rest of the Senate. "Consequently and very unfortunately, at this juncture, we cannot 'support and defend,' as your staff has requested of us."

A spokesman for Durbin, D-Ill., denied that negotiations had stalled.

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