Bankruptcy Cram Downs Rolled Into Foreclosure Relief Bill

Inman News (02/25/08); Carter, Matt
Senate Majority Leader Harry Reid, D-Nev., has included a provision in the Foreclosure Prevention Act of 2008 that would permit bankruptcy judges to modify mortgages on primary residences. The legislation also would earmark $200 million for pre-foreclosure counseling and allow state housing finance authorities to issue $10 billion in mortgage revenue bonds to help struggling subprime borrowers and first-time buyers. The Mortgage Bankers Association is among those interests opposing the bankruptcy provision, insisting that it would boost mortgage interest rates by 1.5 percent or more. "The rest of the bill is great," says MBA vice president of legislative affairs Francis Creighton. "If they drop the bankruptcy language, homeowners could have these other tools--counseling, additional options for refis--almost overnight." Proponents of the bill believe loan servicers are not doing enough to prevent foreclosures, and they contend that up to 600,000 households would be helped by the bankruptcy provision.