Mortgage Lenders Could Be Forced to Modify Mortgage Loan Terms
Back in November, I wrote about a bill that Congress was considering regarding a temporary change to the bankruptcy law. Right now, mortgage loan terms are not among the types of debt bankruptcy judges are allowed to tinker with. Instead, mortgage loan terms remain with the sole purview of mortgage lenders.
Now on the verge of a vote in the Senate (scheduled for tomorrow) the bill prompting debate. And outrage among mortgage lenders. Mortgage lenders are happy about mortgage revenue bonds included in the bill, as well as some other options that allow flexibility. What they do not like is the idea that bankruptcy judges might be able to alter mortgage loan terms such as payment schedule, amounts and interest rates. Inman News reports on the arguments used against this so-called “bankruptcy cram bill”:
Opponents of the plan say allowing bankruptcy judges to change the terms of mortgages after the fact will raise the cost of borrowing, in part because investors who purchase securities backed by mortgages will have less confidence in their ability to collect payments or foreclose on properties. In addition to the Mortgage Bankers Association, other groups opposing changes to the bankruptcy code include the American Bankers Association and the Financial Services Roundtable.
Others, however, applaud the move, insisting that it will help forestall foreclosures. Those who support the bill say that it is likely to make mortgage lenders more amenable to voluntary programs like Project Lifeline. The specter of bankruptcy judges adjusting mortgage loan terms may encourage lenders to be more accomodating.
The measure would only be temporary, but it could be extended in the future if Congress feels that it would be beneficial to the economy.
What do you think of the idea to give bankruptcy judges the power to modify mortgage loan terms?
Tags: mortgage loan terms, mortgage loan blog, home mortgage loan, modify mortgage loan terms,
mortgage lenders, bankruptcy cram bill, banruptcy judges
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