Congress Could Save Your Home From Foreclosure

Congress is considering the “Emergency Home Ownership and Mortgage Equity Protection Act of 2007.” This bill would change the bankruptcy code to permit a bankruptcy judge to modify the terms of a home loan in a Chapter 13 proceeding. HR 3609 makes a small change in §1322(b)(2) of the bankruptcy code that now prevents the court from modifying “the rights of holders of secured claims” when their claim is “secured only by a security interest in real property that is the debtor’s principal residence”.

According to a study conducted by the Center for Responsible Lending, changing the language that prevents the bankruptcy court from modifying the debtor’s home loan could stop 600,000 homes from being lost to foreclosure over the next several years. In addition to saving those homes for the families living in them, preventing foreclosure would help maintain property values for the families who have manageable debt on their homes and live in neighborhoods with a high foreclosure rate.

The National Association of Consumer Bankruptcy Attorneys (NACBA) is cooperating with the Center for Responsible Lending and several other consumer rights organizations in supporting this much needed legislation. NACBA recently sponsored a lobbying event in Washington DC for its members. I had the good fortune to be able to participate in that event.

After a preparatory meeting with NACBA staff and directors the previous day, we met with congressional staffers on January 30, 2008, and explained the pending bills, HR 3609 in the House of Representatives, and SR 2136, entitled “Helping Families Save Their Homes in Bankruptcy Act of 2007″ in the Senate.

I met and talked with congressional staff for both of Oregon’s Senators, Gordon Smith and Ron Wyden, as well as legislative staff for Representatives Peter DeFazio from Oregon’s 4th congressional district and David Wu from the 1st district. Congressman Earl Blumenauer from Oregon’s 3rd congressional district is already a co-sponsor of HR 3609.

There appeared to be significant interest in this important legislation that could help keep many Oregon families in their homes. By extrapolation from the estimates made by the Center for Responsible Lending, there are 3,866 Oregon families that could be helped if the proposed legislation is enacted.

Who would not want to support a legislative change that costs the government no money, costs the lender nothing, and keeps a family in their home? It is hard to see any negative side to this legislation. Despite arguments to the contrary by the Mortgage Bankers Association, there will be no negative impact on home credit.

A recent article in the Los Angeles Times by former HUD Secretary and conservative congressman Jack Kemp was unequivocal in its support for the proposed bankruptcy legislation. Secretary Kemp pointed out the unnecessary difference between the benefits allowed to real estate developers or speculators and homeowners. There is no doubt it is time to level the playing field and keep American families in their homes when it is possible to do so.