As I discussed in the previous blog, there have been several attempts in Congress to pass a mortgage modification proposal….no fewer than three times over the past year.   Sen. Dick Durbin, D-IL has vowed to try again with the new Congress to pass a bill that would allow bankruptcy judges to modify Chapter 13 debtors’ mortgages on their primary residences.

According to Consumer Bankruptcy Digest, Sen. Durbin recently brought the members of the Senate Appropriations Committe to Chicago, where foreclosure rates have increased by more than 50% in the last year, in an effort to persuade the other members on how this revision to the bankruptcy laws is critical in solving the mortgage mess that the country is currently experiencing.

Both Sen. Durbin and Rep. Brad Miller, D-NC have said that they will make the bankruptcy amendments a priority of the 111th Congress.  They will likely be met with strong resistance from the Mortgage Bankers Association and others in the financial services industry.  Supporting the changes to the bankruptcy code are consumer groups such as the National Association of Consumer Bankruptcy Attorneys and the Commercial Law League of America.   In a recent letter to Speaker Nancy Pelosi, the CLLA stated that Chapter 13 debtors whose mortgages  exceed the value of the property are significantly more likely to fail in their Chapter 13 plan.

I personally support the proposed modifications to the bankruptcy code.  It holds the parties who created the problem responsible….and most importantly it does not cost the taxpayers one cent.  The individuals who borrowed more than they could afford are held responsible, as they have to go through the stigma of a bankruptcy, and will continue to pay on their mortgages, rather than walking away from them, resulting in a foreclosure and further losses to the lender.  The banks who irresponsibly lent money to individuals without much if any documentation that the borrower could repay are held responsible because the (sometimes unconscionable) mortgage would be modified into something that the homeowner may be able to pay.

And because it is so important….I will restate it….IT DOESN’T COST THE TAXPAYERS A CENT!

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