Allow bankruptcy judges to modify terms of a home mortgage

Senate rejects new bankruptcy rules for homeowners

Updated: Tuesday, May 12th, 2009 | By Angie Drobnic Holan

President Barack Obama's goal of allowing bankruptcy judges to modify the terms of a home mortgage hit a roadblock when the Senate refused to approve the measure April 30, 2009.

The measure was offered as an amendment to a larger housing bill and failed 45 to 51.

Sen. Richard Durbin, D-Ill., who had sponsored the measure, said he wasn't giving up.

"While I'm disappointed with the outcome of today's vote, I'll continue to bring this issue to the floor until the Senate decides to put the interests of homeowners above the interests of bankers," Durbin said in a statement after the vote. "When I first proposed this legislation two years ago, nearly 2 million homeowners were at risk of losing their homes. Today, that number has skyrocketed to over 8 million homes, with nearly 1 in 6 mortgages in America on the verge of foreclosure. We've given the bankers who got us into this crisis every opportunity to responsibly address this crisis and they have failed. I'll keep working to give homeowners every legal means to save their homes."

Advocates for homeowners in foreclosure also said they hoped to see the bill revived. MoveOn.org has launched an ad campaign targeting senators who voted against the bill and who have accepted campaign contributions from the financial industry.

The White House still supports the measure. "The President continues to support balanced bankruptcy reform to permit judicial modifications of mortgages for borrowers who have run out of options and will continue to work with Congress on housing policies that support the Making Home Affordable programs and strengthen the housing market," said White House spokesman Nick Shapiro.

It's too soon to say whether this measure can be revived. The Senate vote was not a positive sign, however. So we rate this promise Stalled.

Sources:

U.S. Senate, S.Amdt. 1014 to S. 896 (Helping Families Save Their Homes Act of 2009) , April 30, 2009

Sen. Richard Durbin, Statement on mortgage bankruptcy proposal , April 30, 2009

MoveOn.org via YouTube.com, "A Choice to Make" ad , May 8, 2009

Interview with Austin King of the ACORN Financial Justice Center, May 12, 2009

Obama seeks bankruptcy changes for home mortgages

Updated: Friday, February 20th, 2009 | By Angie Drobnic Holan

President Obama unveiled a plan to address the foreclosure crisis on Feb. 18, 2009, centered on a $75 billion fund to help people refinance subprime or underwater mortgages.

As part of his announcement, Obama said he would continue to seek changes to bankruptcy laws.

"My administration will continue to support reforming our bankruptcy rules so that we allow judges to reduce home mortgages on primary residences to their fair market value — as long as borrowers pay their debts under court-ordered plans," Obama said in a speech in Mesa, Ariz. "I just want everybody to understand, that's the rule for investors who own two, three, and four homes.  So it should be the rule for folks who just own one home, as an alternative to foreclosure."

Such legislation has been introduced in Congress. Rep. Barney Frank, D-Mass., who chairs the House Financial Services Committee, said the House would soon take up the legislation.

We rate this promise In the Works.

Sources:

The White House Web site, Remarks by the President on the home mortgage crisis , Feb. 18, 2009

The Boston Globe, President steers $275b to housing , Feb. 19, 2009