VOL. 124 | NO. 44 | Thursday, March 5, 2009
Dems Reach Deal On Mortgage Relief Bill
By JIM KUHNHENN and JULIE HIRSCHFELD DAVIS | Associated Press Writers
WASHINGTON (AP) – For key moderate Democrats in the U.S. House of Representatives, giving debt-strapped homeowners the right to seek mortgage modifications in bankruptcy court had to be a last resort.
So they wrote a compromise to a housing bill that requires bankruptcy judges to consider whether banks offered homeowners reasonable loan restructuring deals before they weigh in with judicial remedies.
The new language is expected to ease the bill onto the House floor for a vote as early as Thursday.
“The concern is that we want to ensure that those people who get relief have tried other avenues,” House Majority Leader Steny Hoyer, D-Md., said Tuesday.
Borrowers also would have a responsibility to prove that they tried to modify their mortgages with their lenders before seeking help in bankruptcy court.
Rep. Zoe Lofgren, D-Calif., one of the centrist negotiators on the bill, said homeowners in fear of losing their homes would have to show that they provided their financial documents to their lenders, “not just a phone call to an answering machine.”
The deal would require judges to consider whether homeowners were offered a “qualified” loan workout – defined as one that would set monthly payments equal to about one-third of a homeowner’s income.
Bankruptcy judges would have to deny a judicial mortgage adjustment in cases where the homeowner is deemed able to afford the loan.
The changes bring the legislation closer in line to what President Barack Obama’s administration has sought and what the banking lobby finds acceptable. The mortgage industry has argued that unfettered access to bankruptcy court mortgage modifications would impose steep and unpredictable costs on its companies that would be passed along to borrowers as higher fees and interest rates.
Their opposition helped derail the bill last week, even after leading Democrats agreed to restrict it to people who had tried other means of reworking their mortgages and those who couldn’t afford their home loans.
The industry has “been giving it everything they’ve got,” said Rep. Brad Miller, D-N.C., an architect of the legislation. “They still have remarkable influence.”
Still, Miller and some other backers of the idea said they support the new plan.
“It would encourage lenders to make modifications and there would be consequences if they don’t do it,” Miller said.
Democrats discussed the compromise in a closed meeting Tuesday with Housing Secretary Shaun Donovan, who told them the legislation would dovetail with the administration’s overall efforts to reduce foreclosures. Obama unveiled a $75 billion housing initiative two weeks ago that included a call for legislation to permit adjustments to mortgages in bankruptcy court.
Following the session, Lofgren and two other moderate Democrats – Ellen Tauscher and Dennis Cardoza of California – circulated a letter seeking support for their compromise.
“Some may think the changes made to the bill go too far, while others will contend that they do not go far enough,” the “Dear Colleague” letter said. “Given the ever-deepening housing crisis, however, we ask you to place such differences aside – as we have done –and support this effort.”
Some liberals said the new limits were inappropriate. Rep. Maxine Waters, D-Calif., said many mortgage companies make it impossible for homeowners to even complete a phone call to their lenders, much less work out more affordable loan terms.
“I don’t think people ought to have to go through that mess” to get mortgage relief in bankruptcy courts, Waters said.
She said the banking industry still has a stranglehold on Congress. “These guys rule this place,” Waters said.
Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.