Legislation aimed at allowing bankruptcy judges to modify home mortgages to stem the tide of foreclosures looks like it will not get the 60 Senate votes it would need to pass. This legislation was seen by many bankrutpcy attorneys and bankruptcy experts alike as the best way to quickly help those debtors facing foreclosure, whether in Orange County, or in any county for that matter.
From Yahoo News:
“In February, Obama announced his plan to save some 9 million debt-ridden individuals from losing their homes by providing incentives to lenders to cut homeowners’ monthly payments or refinance loans for individuals whose home’s market value has sunk below what they owe.
As part of the plan, Obama said he also wanted to change bankruptcy laws so a judge can reduce a person’s mortgage payment based on its market value if the homeowner had otherwise been unable to modify their loan.
While cast as a last resort, the bankruptcy option would have arguably had the most immediate impact in stemming the tide of foreclosures facing the nation.
Bankruptcy judges can already reduce loans on investment properties or personal property based on the property’s current value.
Congressional Democrats championed the legislation, which passed the House in March. But the measure quickly stalled in the Senate, where a simple majority is not enough and 60 votes are needed to overcome the objections of any one senator.
Senate Majority Whip Dick Durbin has been trying to negotiate a deal with the industry under the assumption that an agreement would help secure the bill’s passage.
“If we don’t do something significant and specific then it’s going to go from bad to worse,” Durbin, D-Ill., said in an interview.
But aides acknowledged that the bill had lost momentum in recent weeks, as one association representing federal credit unions publicly rejected the measure after weeks of private talks.
Democratic leaders said they wanted to hold the vote anyway to put Republicans on record for turning their backs on Americans facing foreclosure.
The bankruptcy provision will be offered as an amendment to legislation aimed at freeing capital for banks by increasing the borrowing authority of the Federal Deposit Insurance Corp.
If it doesn’t pass, Democrats say they will try again. But Durbin predicts the Senate might not be able to act in time to stem the tide of foreclosures.
“We’d continue with what we have — more and more people falling into delinquency and foreclosure with no place to turn,” he said. “I think the banks have been derelict in their responsibility.”
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