Congress Considers "Forced Mortgage Modifications" For Homeowners In Bankruptcy; Elimination Of Credit Counseling For Ch. 13 Homeowners In Foreclosure

In a story that may be unpleasant news to some mortgage lenders, mortgage servicing companies, and some foreclosure rescue operators, Inman News reports:

• Legislation that would allow bankruptcy courts to modify the terms of a homeowner's mortgage loan could save 600,000 homes from foreclosure, the bill's sponsor claims. HR 3609, the Emergency Home Ownership and Mortgage Equity Protection Act of 2007, would repeal a legal provision that prohibits bankruptcy courts from modifying the repayment terms of home mortgages. Bankruptcy courts already have the power to modify payments on other secured debts, including mortgages on other properties. "Responsible lenders who made loans on reasonable terms have nothing to worry about in bankruptcy court, but predatory lenders will end up with the loans they should have made in the first place," said bill sponsor Rep. Brad Miller, D-N.C., in a press release.

For more, see Bill would let bankruptcy courts impose loan mods (Moody's: Subprime servicers modify only 1% of loans).

See also, House bill would let courts alter mortgages (Reuters) or here for same article) (ABC News).

Postscript: Section 5 of the proposed legislation, if passed, would eliminate the credit counseling requirement for homeowners facing foreclosure who have filed Chapter 13 bankruptcy.

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