Back in April, during the height of the mortgage
rescue package negotiations in Congress, we were frustrated to see Senate Republicans
and the White House beat down Sen. Dick Durbin's proposal to aid
struggling homeowners by allowing the terms of their mortgages
to be revised in bankruptcy court. Apparently, so was the Illinois
senator. Now, following encouraging testimony
late last week from FDIC Chairwoman Sheila Bair in which she unveiled an aggressive plan to help those homeowners facing foreclosure, Durbin is
throwing his proposal back on the table:
A U.S. senator on Monday introduced legislation to let judges alter the terms of distressed mortgages in bankruptcy cases, reviving a controversial proposal meant to help troubled homeowners, said an aide to the lawmaker.
Illinois Democrat Richard Durbin unveiled the bill, which his spokesman said would "allow bankruptcy judges to modify mortgages on primary residences."
As Reuters points out, there are a few differences between Durbin's original proposal and this iteration, most of which relate to oversight of the already approved bailout package. But at its core, allowing judges to reduce the amount borrowers snowed over by unaffordable mortgages owe in bankruptcy court is a common-sense solution to the ever worsening foreclosure crisis. When proposed last winter, advocates concluded that such a plan would help 600,000 homeowners keep their homes. And the only reason the banking industry opposed the idea was because, in the words of the Washington Post, "they could be forced to trim their profits."
Cook County Sherriff Tom Dart, who earned some national profile when he issued a brief moratorium on foreclosure evictions in October, will testify in support of the measure during Durbin's hearing tomorrow. We'll keep you posted on the bill's progress.
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