Lenders Fighting Mortgage Rewrite

Washington Post (02/22/08) P. D1; Birnbaum, Jeffrey H.
The Mortgage Bankers Association and other banking industry interests have joined forces to fight proposals that would allow homeowners to declare bankruptcy and then enable judges to reduce the amount owed as part of resolving their debt. The banking groups sent a letter to Senate leaders last week that said such a bill would "have a very negative impact in the financial markets, which are struggling in part because of difficulties in valuing the mortgages that underlay securities [and] would greatly increase the uncertainty that already exists." They add that borrowers would have to assume more of the risk in the form of higher interest rates, larger down payments or increased closing costs. Advocates say giving bankruptcy judges the power to rewrite mortgages could prevent up to 600,000 home foreclosures. The Senate could vote on its version of the bill as early as next week.