WASHINGTON — Banks and other financial firms must follow through on promises to increase the number of struggling homeowners they help or an industry-opposed change to bankruptcy laws could return, a top House Democrat said Wednesday.
Rep. Barney Frank, D-Mass., who chairs the House Financial Services Committee, said if mortgage servicing firms fail to fulfill their commitment to policymakers to help more borrowers they could face legislative retribution on Capitol Hill. Allowing bankruptcy judges to modify the terms of mortgages, which isn't allowed under current law and is opposed by the financial services industry, could become reality, Frank said.
"If this last effort to produce significant modifications fails, the argument for reviving the bankruptcy option will be extremely strong," Frank warned in a statement released by his office.
The comment came the day after executives from 25 mortgage-servicing companies were called to Washington to meet with top Obama administration officials over what has thus far been a lackluster attempt to modify the loans of struggling borrowers. The Treasury Department and Department of Housing and Urban Development orchestrated the event, getting executives to commit to boost their efforts and attempt to meet a goal of completing 500,000 trial modifications by Nov. 1.