WASHINGTON – For the second time this week, a representative of leading community development credit union Self-Help CU called on lawmakers to amend the bankruptcy laws to allow troubled homeowners to ask the courts to restructure their mortgages.
Michael Calhoun, general counsel for the Center for Responsible Lending, a consumer lobby funded by Self-Help, said during a hearing of the Senate Judiciary Committee yesterday that voluntary restructurings of at-risk mortgages urged under several federal programs have not been successful in saving many people from foreclosures. "Voluntary loan-by-loan modifications have fallen short and will continue to do so," said Calhoun, who said more muscle needs to be added to the process, including the ability of homeowners to ask the bankruptcy courts for assistance.
A bill proposed to allow the bankruptcy courts to restructure mortgages "is essential to resolving the financial crisis. It should be enacted now," he said.
Calhoun’s position was supported by New York Sen. Charles Schumer, who said, "To me, this provision is the key to unlocking the mortgage crisis."
"No voluntary program is going to work," said Schumer. "Passing this provision could be the difference between a medium recession or a deep recession, or worse."
Calhoun’s appearance came two days after Martin Eakes, the president of Self-Help appeared before the Senate Banking Committee to make the same request.
Self-Help has been in the forefront of battling predatory lending and efforts to reign in the exploding number of home foreclosures. The CDCU’s position is in contrast to that of CUNA and NAFCU, which both oppose the bankruptcy provision.
Yesterday’s hearing by the Judiciary Committee was over a bill reintroduced by Illinois Sen. Richard Durbin that would expand the bankruptcy code to give bankruptcy courts jurisdiction over home mortgages, as all other loans.
While Durbin’s bill has little chance of passage in the few days Congress is meeting over the next week, yesterday’s hearing indicates the issue will be reintroduced soon after lawmakers return in January for the 111th Congress. In addition, President-elect Obama has indicated his support for the bankruptcy provision.
