Charles
Citigroup backs mortgage relief; Bill would let judges reduce what debtors owe (A paralegal pro foreclosure negotiator told me she calls this a "short sale" when offered out side of bankrutpcy;smile -CB)
http://montgomeryadvertiser.com/article/20090109/BUSINESS/901090303/1003/BUSINESS
Julie Schmit and Stephanie Armour
Lending giant Citigroup on Thursday threw its support behind a controversial bill in Congress to let bankruptcy judges reduce what debtors owe on home mortgages in an effort to stem the USA's rising tide of foreclosures.
The proposal, pushed by Democratic lawmakers, could be included in economic stimulus legislation.
The banking industry has long fought such "cramdown" legislation, saying that it would raise costs for other mortgage borrowers.
But Citigroup's backing -- after winning some concessions on the proposal's terms -- may persuade other banks to do the same and encourage the passage of legislation, supporters say.
"This would help hundreds of thousands of people quickly reach loan modifications," says Kathleen Day of the Center for Responsible Lending, which supports the measure. "If you can keep people in their homes, everybody wins."
An estimated 8.1 million U.S. homeowners are at risk of foreclosure.
The compromise was struck between Citigroup and top lawmakers, including Sen. Richard Durbin, D-Ill., and Sen. Charles Schumer, D-N.Y. Schumer said several banks have expressed interest.
Citigroup, in a letter to lawmakers Thursday, said the change would be an additional tool to help troubled homeowners and "represent an important step forward."
But the Mortgage Bankers Association said in a statement it remained opposed to cramdown legislation because it would destabilize an already turbulent mortgage market.
Under the bill, only loans originated before the measure's enactment could be altered. Lawmakers had sought the change for all loans. Also, borrowers would have to show that they attempted to contact their lenders to modify the loans before they filed for bankruptcy.
Judges could lower mortgage principal, change interest rates or extend terms.
Currently, bankruptcy judges can alter loan terms for vacation homes and other debt, but not mortgages on primary residences. Giving judges that power would not only help troubled homeowners, but prod banks to do more loan modifications before homeowners go to bankruptcy court, supporters say. So far, banks' voluntary programs have had only minimal success.
"Whatever (lenders) were doing was working really badly," says Patrick Newport, an IHS Global Insight economist.
MORATORIUM NOW! COALITION TO STOP FORECLOSURES AND EVICTIONS ORGANIZING MEETING -SATURDAY, JANUARY 10, 12:00 NOON, CENTRAL UNITED METHODIST CHURCH, 23 E. ADAMS, 4TH FLOOR (at Woodward, Grand Circus Park, Detroit)
MEETING TO PLAN DEMONSTRATION AT GOV. GRANHOLM'S STATE OF THE STATE ADDRESS TUESDAY, FEBRUARY 3, 6:00 PM AT THE STATE CAPITOL IN LANSING.
DEMAND A DECLARATION OF A STATE OF ECONOMIC EMERGENCY IN MICHIGAN, AND TWO YEAR MORATORIUM ON FORECLOSURES AND EVICTIONS!
This message has been scanned for malware by SurfControl plc. www.surfcontrol.com