WASHINGTON – The Senate Judiciary Committee will take another crack during a hearing today at opening up the bankruptcy process to troubled homeowners, but the long-shot bid has an outside shot of passage in the so-called lame duck session of Congress because it is attached to legislation that would set some standards for the massive banking bailout.
Sen. Richard Durbin, senior member of the Judiciary Committee, said the soaring numbers of home foreclosures give impetus to his bill to allow bankruptcy courts to restructure mortgages, so-called cramdowns. While both the Senate and the House turned aside similar bills earlier this year, Durbin’s newest version, introduced Monday would also require federal agencies to restructure mortgage loans involved in homeowner assistance programs already approved by Congress. Two such programs established in recent months urged, but did not require, modification of eligible mortgage loans.
Durbin's bill also would bar any bank participating in a massive government bailout program from increasing its dividend while the government owns preferred shares in the bank.
The credit union lobby has fought against the cramdown provision, maintaining it would throw more uncertainty into the mortgage market, and thus, raise rates. A new survey released Monday by NAFCU shows 88% of credit union CEOs oppose the cramdown provision.
While Durbin’s bill is very unlikely to pass in the brief lame duck session, the growing interest in the measure makes it likely it will be among the first bills introduced when the new Congress convenes in January.
