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Written by Jamie Simpson
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Last Updated March 4, 2009 |
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A bill that would allow bankruptcy judges to alter mortgages in an effort to halt foreclosures and the recent decline in the housing market is before the Congress. The measure was pushed last year, but was strongly opposed by both Senate Republicans and President Bush. Current bankruptcy laws allow judges to reduce the principal on mortgages for vacation homes, cars and boats, but not for a primary residence. Lawmakers hope that passing the measure would encourage lenders to modify existing loans to become more affordable for troubled borrowers. Lenders in the mortgage industry have argued that the legislation would negatively affect all consumers, as reducing principal owed on troubled loans would increase costs for others. The bill also include a provision requiring borrowers to seek a voluntary modification from their lender prior to bringing it to bankruptcy court. The bill would only apply to mortgages existing at the time of its enactment.
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