Bill Would Give Bankruptcy Judges Power to Rewrite Home Mortgages
A pending congressional proposal to allow bankruptcy judges to reduce borrowers’ outstanding home mortgages is running into some strong opposition from lenders.
The measure, which could be voted on in the Senate next week, would allow the judges to change the terms of mortgages for primary residences, the Washington Post reports. The measure is backed by consumer groups, civil rights organizations, labor unions and AARP.
The House Judiciary Committee passed a similar measure last year. Backers say the bill could help up to 600,000 homeowners avoid foreclosure.
One the other side of the debate, the Mortgage Bankers Association maintains the proposal would increase mortgage rates by at least one and a half points, result in higher closing costs and boost required down payments. Opponents also say the bill could hurt the financial markets, which are already struggling to value mortgage-backed securities.
The MBA is one of about a dozen industry groups fighting the bill.
