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Source of Title Blog

More Support For Bankruptcy Reform
by Robert Franco | 2007/12/05 |

As I mentioned in a previous post, there is a movement in the House of Representatives to reform the bankruptcy code to allow the approval of a plan that would modify the terms of mortgages. (See Bankruptcy: The Subprime Borrowers' New Best Friend) The idea seems to be spreading to the Senate. Senator Banking Chairman Christopher Dodd is planning to introduce similar legislation.

Senate Banking Chairman Christopher J. Dodd (D-CT) said Wednesday that he plans to introduce legislation soon that would rewrite portions of the bankruptcy code. His package will include language that would change the treatment of mortgage debt to help struggling property owners hold on to their homes, considering debtors’ “individual circumstances” when determining their ability to pay off their debts. It also would ensure that medical debts can always be discharged in bankruptcy.

In response to problems in the subprime mortgage market, other lawmakers in both chambers already have been pressing changes to the bankruptcy law similar to Dodd’s mortgage proposal. His measure would allow bankruptcy courts to modify the terms of home mortgages during bankruptcy proceedings, something prohibited under current law. In the House, members also have been working on a deal to pass similar legislation (HR 3609). The Judiciary Committee on November 7, postponed a scheduled markup of the measure after a compromise designed to win some Republican support fell through.


This type of change would allow for case by case application of remedies for those who need it most, those who qualify for bankruptcy protection. The most recent changes to the bankruptcy code were creditor friendly, making it more difficult for debts to be discharged. I'm not so sure that makes good sense - after all, bankruptcy is supposed to be a way for those in need to get a fresh start.

On one hand, most of these debtors got themselves into their predicament. On the other, creditors, who are much more sophisticated, have extended loans to many who could not afford them. Should we reward those who intentionally made bad loans?

In my opinion, some form of this legislation will pass and mortgage creditors will be subject to some degree of control by the bankruptcy process. Perhaps this will light a fire under their loss mitigation teams to help distraught homeowners before they are forced in to bankruptcy.

Robert A. Franco
SOURCE OF TITLE
rfranco@sourceoftitle.com

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Categories: Legislation, Subprime Lending

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Source of Title Blog

Robert A. FrancoThe focus of this blog will be on sharing my thoughts and concerns related to the small title agents and abstractors. The industry has changed dramatically over the past ten years and I believe that we are just seeing the beginning. As the evolution continues, what will become of the many small independent title professionals who have long been the cornerstone of the industry?

Robert A. Franco
SOURCE OF TITLE

 

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