Washington, D.C., lawmakers have bills in play that could provide a carrot -- or a stick -- for lenders and loan servicers to participate in the Bush administration's rate-freeze plan. Legislation that would allow bankruptcy judges to modify the terms of Chapter 13 debtors' mortgage loans could serve as a stick for lenders to conduct their own workouts, rather than have them imposed on them by a court. The Center for Responsible Lending supports that approach, saying it has the potential to help more borrowers than the Bush administration's voluntary rate-freeze plan, announced Thursday (see Inman News story). But the mortgage lending industry argues that changing the bankruptcy code to allow judges to conduct "cram downs" would raise the cost of borrowing for all. Another recently introduced bill would shield loan servicers who engage in workouts with borrowers from lawsuits by investors in securities backed by loans. One motivation for the Bush administration's agreement ...
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