“New York-based Citigroup Inc. endorsed the proposed Senate bill that would give bankruptcy judges the power to modify mortgages with so-called ‘cramdowns,’ to force lenders to lower the burden on homeowners on Thursday, according to a story in The Wall Street Journal.
The “Helping Families Save Their Homes in Bankruptcy Act” was reintroduced to the Senate earlier this week by Illinois Democrat Sen. Dick Durbin, the Senate’s second-ranking Democrat. Durbin’s been working on the legislation for more than a year.
The deal, Senate staffers told The Wall Street Journal, is likely the first of several measures being crafted this year that propose to trim the principal owed by homeowners underwater on their mortgages.
‘This is the breakthrough we’ve been waiting for, to have a major financial institution support this legislation will create an incentive for others to come our way,’ Durbin told the Journal. ‘I want to congratulate Citi for being open-minded about this [and] playing a major leadership role.’
As written, the bill would allow judges to:
– Extend the length of repayment to lower monthly payments
– Replace variable interest rates with fixed rates
– Waive the bankruptcy counseling requirement for homeowners facing foreclosure to get homeowners in court faster
– Allow judges to waive prepayment penalties
– Maintain debtors’ legal claims against predatory lenders while in bankruptcy
A new component, added as a concession to lenders, would eliminate consumer loan forgiveness for lenders who have violated the Truth in Lending Act during bankruptcy proceedings, and would only subject lenders to fines.
Now that Citigroup has endorsed the deal, lawmakers hope other financial institutions will also offer their support. According to the Journal, some banks have indicated they would support the bill, marking a change of position for the industry, which previously argued cramdowns would raise the cost of mortgages for all buyers and overwhelm bankruptcy courts.”
Bankruptcy judges, and every bankruptcy attorney worth his salt, are hoping this measure passes, for the sake of millions of bankruptcy mortgage holders, thousands of whom live in Riverside County. As Riverside County bankruptcy attorneys can attest, the Riverside Bankruptcy Courthouse has seen it’s fair share of cases that could have been helped by this legislation. Here’s hoping Citibank leads the charge to finally get it done, and finally stem the tide of foreclosures in Riverside County, San Bernardino County, and across the country.
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