26 Feb 09 Mortgage Relief Bill Sent to House
Debt stricken homeowners facing foreclosure could resort to bankruptcy to force reductions in their monthly home loan payments under a measure awaiting a House vote. The bill set for a vote Thursday would let bankruptcy judges reduce the principal and interest rates on home loans. But the measure has been watered down since Democrats first proposed it, due in large part to mortgage industry lobbying to limit the cost for banks. The plan is part of a broader housing package that also would raise the Federal Deposit Insurance Corporation’s borrowing authority and take other steps to prevent foreclosures. President Barack Obama called for the bankruptcy measure last week as part of his housing rescue plan. Democrats and consumer advocates regard it as crucial to slowing the rapid rate of foreclosures.
The mortgage industry contends the measure will impose steep and unpredictable costs on its companies, which will be forced to raise fees and mortgage interest rates for borrowers. The industry spent millions last year on a successful lobbying effort to kill the bill, which almost all Republicans oppose. Opponents call it the “cram-down.”
This year, with Obama in the White House and Democrats enjoying a broader majority, a rift has emerged in the industry. One major player, Citigroup Inc., has bowed to the new political reality and moved to grab a seat at the negotiating table. It cut a deal last month with Democrats to back the plan in return for some key concessions. The measure now in the House only applies to existing mortgage loans made before enactment and is limited to homeowners who have tried working with their lenders to adjust their loans before seeking relief in bankruptcy.
Tags: mortgage interest rates
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