Bankruptcy Judges to modify mortgages!! This is what we have been waiting for!!

Bill Would Allow Judges to Modify Mortgages
Austin Kilgore | 01.07.09

Illinois Sen. Dick Durbin introduced legislation Monday that would give bankruptcy judges the authority to modify mortgages on a debtor’s primary residence to help curb foreclosures.

The bill would prevent millions of foreclosures, Durbin, the second-ranking Democrat in the U.S. Senate, said in a statement.

“For nearly two years, we’ve heard dire predictions about the housing crisis and its effects on the economy. Sadly, they have not only come true, but have been far worse than anyone imagined,” Durbin’s statement said. “The question that faces us now is this: after committing over one trillion dollars in taxpayer money to address the financial crisis, why don’t we take a step that would indisputably reduce foreclosures and that would cost taxpayers nothing?”

As written, the “Helping Families Save Their Homes in Bankruptcy” act would allow judges to:

– Extend the length of repayment to lower monthly payments
– Replace variable interest rates with fixed rates
– Waive the bankruptcy counseling requirement for homeowners facing foreclosure to get homeowners in court faster
– Allow judges to waive prepayment penalties
– Maintain debtors’ legal claims against predatory lenders while in bankruptcy

Durbin first introduced the bill in fall of 2007, but it failed under opposition from President George W. Bush and Republican lawmakers.

In his statement, Durbin said his plan will not cost taxpayers anything, and the resulting fewer foreclosures would help municipalities maintain property tax revenue and reduce demand on law enforcement departments that execute foreclosures and are responsible for patrolling neighborhoods with abandoned properties.

The proposed bill would let bankruptcy judges rewrite home loans the same way they do other debt, including vacation and farm homes, but critics are concerned changes to the bankruptcy laws would hurt the availability of credit.

“The bills will increase the cost of borrowing for a home, at the exact moment we need home sales to restart,” Steve Bartlett, president of the Financial Services Roundtable, told Reuters.

Michigan Democrat John Conyers introduced a similar bill in the House of Representatives this week, and Durbin is also working to get the bill’s language included in the upcoming economic stimulus package.
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