The Obama administration and Congress are advocating for more mortgage modifications. One constraint is the large number of mortgages held in securitization trusts, and the fact that parties servicing these loans may have contractual obligations that limit their ability to modify loans.
In response, Congress is considering proposals to provide immunity for servicers that modify certain loans in lieu of foreclosure. Some argue that these "safe harbor" proposals are unconstitutional, usually citing the prohibition on the abrogation of contracts. However, the case law indicates that a well-drafted provision should have no trouble in passing constitutional muster.