Lawmaker to Lenders: Modify Mortgages, or We'll Revive 'Cramdown' Bill
The chairman of the House Financial Services Committee is threatening to revive stalled legislation that would give bankruptcy judges greater power to revise mortgage terms and even reduce the principal balance if lenders don’t start modifying more mortgages.
Despite the mortgage relief programs rolled out this year, foreclosures and delinquencies have continued to rise, and a number of congressional lawmakers believe more aggressive efforts by lenders to modify loans are needed, Bloomberg reports.
“People in the servicing industry and in the broader financial industry must understand that if this last effort to produce significant modifications fails, the argument for reviving the bankruptcy option will be extremely strong, and I think there is a substantial chance that the outcome will be different,” says Rep. Barney Frank (D. Mass). He chairs the financial services committee.
In addition to the so-called “cramdown” provision, which would give bankruptcy judges the power to reduce homeowners’ principal mortgage balance, the proposed legislation also would permit lengthened loan terms and reduced interest rates.
Earlier related coverage:
ABAJournal.com: “House OKs Mortgage ‘Cramdown’ Bill; Tougher Fight Expected in Senate”
ABAJournal.com: “Homeowner ‘Cramdown’ Legislation Opposed By Obama”
