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Obama Resists Attempt to Add Bankruptcy Law Change in Economic...
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by cassy82 | January 27, 2009 at 10:35 am
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Efforts to add a stipulation in the economic stimulus bill supported by congressional Democrats that would permit bankruptcy judges to minimize mortgages as a possible solution to the foreclosure problem is being resisted by President-elect Obama and his advisers.
It was made apparent to lawmakers by Obama’s economics adviser Jason Furman that Obama believes the alleged “cramdown” stipulation would sacrifice GOP votes and jeopardize bipartisan support in the Senate.
On the other hand, key supporters of the cramdown stipulation believe the issue has to be dealt with the soonest. Although risky, it may even be worth sacrificing some Republican cooperation to aid homeowners in the foreclosure problem.
With the bankruptcy provision, homeowners nearing foreclosure who owe more than what the value of their house is can seek assistance and can report for bankruptcy. A bankruptcy judge can lessen the home loan into the original worth of the home.
Democrats have urged for the change in the law as a means of aiding homeowners trapped in the foreclosure problem, compelling lenders to adjust more home loans rather than letting a bankruptcy judge reduce payments more harshly. However, lenders argued that the law would initiate a rise in mortgage rates due to an increase in loan charges that might be soon revised by a judge.
Lenders such as Citigroup and Durbin gave their approval to the change in law for as long as it is restricted to loans prior to endorsing the bill. According to Matt Gleischman, Durbin’s spokesman, there are high expectations of the bill to be passed in both the House and Senate.
A possibility could be including the cramdowns into an “omnibus” spending proposition to complete the appropriations work left unresolved by Congress last year. The House is expected to review the bill as soon as it passes the stimulus to the Senate. Cramdowns can also be set in legislation revising terms of the $700 billion bailout ratified in the fall. Still, there are some who are not confident that the bill will be passed in the Senate.
None the less, many people are giving up their homes because of foreclosure each day. It is important that the provision will be approved as soon as possible.
By Cassiano Travareli
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cassy82
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Most RecentMost Recommended Comments (2)
at 09:48 on February 28th, 2009
The wife and I are lifelong registered Democrats who are outraged by the use of tax funds to help pay down distressed homeowners mortgages. The attempt to change the bankruptcy law (cramdown) is the last straw. We can't wait for the New Jersey election for governor and the mid-term elections in 2010 to express our displeasure. Governor Jon Corzine is already behind Republican Chris Christie in early polling. We would have voted for Corzine to make sure a Democrat was appointed in case of the death of Senator Lautenberg, but not now, as Corzine supports Obama's radical changes.
at 18:41 on March 7th, 2009
The "cram-down" was the law before the 2005 "reform." It was the law during the 91/RTC housing crisis. Critics act like this is some special sort of special benefit to homeowners. Multiple homes (along with cars) can be crammed down now. The only change in this law would be to include the personal home in a 13 cram down. We need to go much further and restore the pre 2006 code in full. Why is OK to bail out GM (and give it great latitude via 11) in Bankruptcy, but not homeowners? If you don't give homeowners relief, "credit default swaps" will bring down the entire world financial system.