September 10, 2009

Frank considers cramdown law

Influential congressman Barney Frank, D-Mass., said slow progress in assisting troubled homeowners could lead to a new push to change bankruptcy laws.

Frank, chairman of the House Committee on Financial Services, said Congress should revisit the issue of allowing bankruptcy judges to modify mortgages if the banking industry does not increase the pace of its help to homeowners, The Washington Post reported Thursday.

The federal Making Home Affordable program, relying on industry cooperation, has lowered payments for 360,165 homeowners since March, the Treasury reported. Its goal was to help 500,000 homeowners by Nov. 1.

I am disappointed at the pace of this program. The best lobbyists we have for getting bankruptcy legislation passed are the servicers who are not doing a very good job of getting mortgages modified, Frank said.

An effort to provide bankruptcy judges with the power to modify home loans -- a practice called cramdown -- failed earlier this year, passing narrowly in the House, but failing in the U.S. Senate, the Post said.

The possibility of allowing judges permission to modify loans has met with opposition from lenders.

A cramdown provision would seriously prolong our housing recovery by decreasing mortgage credit, said Rep. Spencer Bachus, R-Ala.