Industry NewsMortgage

Bankruptcy cram downs rolled into foreclosure relief bill

Senate to weigh accelerated hearing process Tuesday

Senate Democrats are attempting to push through a controversial plan to allow bankruptcy judges to modify the terms of troubled borrowers' mortgages as part of a larger package of foreclosure prevention programs. Allowing judges to "cram down" loan modifications over the objections of lenders could raise interest rates on mortgage loans by 1.5 percent or more, industry groups fighting the proposed changes to the bankruptcy code say. Senate Majority Leader Harry Reid, D-Nev., has incorporated provisions of a previous bankruptcy cram down bill, S 2136, into a broader piece of legislation, the Foreclosure Prevention Act of 2008. The new bill, S 2636, also includes several programs that lenders support -- including $200 million for pre-foreclosure counseling and authorization for state housing finance authorities to issue $10 billion in additional mortgage revenue bonds to refinance subprime loans and provide mortgages for first-time home buyers. Reid has scheduled a vote on Tuesday in w...