House Bill Aims to Combat Foreclosure Crisis
by Foreclosure Fighter staff writer
When Cinderella's evil stepmother and stepsisters find out that their one-time servant will soon be their queen, there is a sense of well-deserved justice. There's nothing quite as satisfying as a bully getting his comeuppance. And, with a new bill introduced in the House, predatory lenders may soon get what's coming to them.
The bill, introduced by Brad Miller of North Carolina and Linda Sanchez of California, and cosponsored by Barney Frank, Carolyn Maloney, and Mel Watt, is a response to the foreclosure crisis currently gripping the nation.
According to the statistics provided by the sponsoring representatives, as many as 5 million adjustable rate mortgages will reset in the coming 18 months, meaning that 2.2 million homeowners could face foreclosure in the next two years.
Many of the foreclosures will be the result of unwieldy subprime loans whose rates have reset and whose terms cannot be modified, even by a bankruptcy court.
The Center for Responsible Lending predicts that as many as 600,000 families will be able to save their homes if this bill is passed, according to government reports. But Congress needs to act now to prevent as many foreclosures as possible.
How the New Law Would Work to Stop Foreclosure
Currently, bankruptcy law denies a bankruptcy court the right to modify the terms of a home mortgage, but allows the court to alter the terms of any other secured debt-even mortgages on properties besides the home.
If enacted, the bill would allow bankruptcy courts to change the terms of a home's mortgage. By repealing the no-modification law, the bill would allow homeowners to treat home loans like any other secured debt in bankruptcy filings, and increase their likelihood of avoiding foreclosure.
Miller has reportedly said that lenders who offered homeowners appropriate, reasonable terms on their mortgages will have "nothing to worry about" if the bill is passed. Predatory lenders and those who offered subprime loans indiscriminately, though, will face some consequences.
If successful, the bill will force predatory lenders to offer the types of loans they should have provided in the first place.
Foreclosure Prevention Could Arrive Just in Time
If voted into law, the bill could mean relief for hundreds of thousands of American families facing foreclosure. Across the country, grassroots movements are attempting to accomplish what this bill could do more forcefully.
In Cleveland, for example, the Save the American Dream group is calling for a two-year moratorium on price hikes in ARMs. Organizations across the country have set up hotlines designed to help and advise homeowners with foreclosure concerns. Some groups have introduced codes of lending ethics.
Whether or not this bill passes into law, it should serve to underline the need for action.