H.B. 7307: Chapter 13 Bankruptcy Home Mortgage Modification Bill Introduced
By Jill Michaux, Kansas Bankruptcy Attorney on Nov 28, 2008 in Bankruptcy Cases & Legislation, Bankruptcy Protection & Automatic Stay, Benefits of Bankruptcy
Democratic Congressional leaders introduced House Bill 7307 this week to remove a ban on modification of a homeowners residential mortgage in chapter 13 bankruptcy. It would correct a 30-year-old anomaly in the Bankruptcy Code allowing the modification of nearly all loans except a family’s home.
“The legislation that Rep. Sánchez and I plan to introduce would allow deserving homeowners to modify their loans, under the supervision of a court, a trustee, and the Department of Justice,” House Judiciary Committee John Conyers, Jr. (D-MI), said. “A family would be required to repay the actual value of the home, and would allow the court to modify the predatory interest rate to market value, plus an extra risk premium. Lenders will be protected by preserving their rights to the collateral and extra interest as a cushion against possible future defaults.”
“These are the same rights every other borrower has under current law, including speculators who may own hundreds of properties, owners of multi-million dollar vacation homes, yachts, and private jets,”
explained Commercial and Administrative Law Subcommittee Chairwoman Linda Sánchez (D-CA). “There is no reason why families should not have the same legal protection to save their homes.”
Conyers said the Bush administration efforts to fix the home foreclosure problem have failed. “We cannot sit idly by and trust those who caused the home foreclosure crisis to fix this problem. We’ve tried that, and it hasn’t worked. Millions of families have lost their homes, and many millions more will as well unless we act,” he said.
President-elect Barrack Obama advocates closing the bankruptcy loophole for mortgage companies” in his issues statements. “Obama and Biden will work to eliminate the provision that prevents bankruptcy courts from modifying an individual’s mortgage payments. They believe that the subprime mortgage industry, which has engaged in dangerous and sometimes unscrupulous business practices, should not be shielded by outdated federal law.”
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