Bankruptcy Judge Loan Modification Plan Hits Wall in Senate
The bankruptcy bill, sponsored by Sen. Richard Durbin (D-Ill.), permits bankruptcy judges to reduce, or “cramdown,” homeowners’ mortgage payments to help borrowers stay in their homes — an option currently available to save vacation homes, yachts and almost any other valuable asset, but not primary homes. The House passed a similar bill in March, but it’s been stalled in the upper chamber while Durbin and other Senate leaders tried for weeks to negotiate the support of the giants of the finance industry, including Bank of America, Wells Fargo, JP Morgan Chase and the Credit Union National Association.
A central element of the Democrats’ strategy to stabilize the economy — empowering homeowners to prevent foreclosures through bankruptcy — has hit a wall in the Senate, where fierce opposition from the finance industry is threatening to kill the proposal this week. Read more
Mortgage Cram-Downs Stripped Out of Rescue Bill
Cram-downs are kaput in Congress.
Legislation to give bankruptcy judges the power to reduce home mortgage debt–by “cramming down” the principal–doesn’t appear to have enough votes and will be stripped out of a broader housing bill in the Senate.
The cram-down effort is a major plank of President Barack Obama’s housing rescue, which also offers financial incentives to mortgage servicers to modify loans and allows some homeowners with little to no equity to refinance.
The cram-down measure already passed the House of Representatives as part of the housing rescue. But it faced heavy opposition from the banking industry, and there were signals last week that Senate leaders might discard the measure from the housing bill.
