Senate Judiciary Committee Examines S.3690

The Senate Judiciary Committee examined the "Homeowner Assistance and Taxpayer Protection Act" S.3690 introduced yesterday by Senator Richard Durbin. The bill includes provisions that would allow owners of principal residential property to modify their mortgages in Chapter 13 bankruptcy.

Senator Durbin is reported to have stated today that it is highly unlikely that S.3690 will pass in this abbreviated lame-duck session of Congress which may be over in 48 hours. He did say though that the bill would be reintroduced next year in the new Congress as quickly as possible. Mortgage bankers are reported to staunchly oppose the bill.

Durbin Introduces Bill to Allow Chapter 13 Bankrutpcy Modification of Mortgages on Principal Residences

A bill was introduced into the Senate today by Senator Richard Durbin (D-IL) entitled the "Homeowner Assistance and Taxpayer Protection Act." S.3690 The bill includes provisions that would allow owners of principal residential property to modify their mortgages in Chapter 13 bankruptcy. Presently, only mortgages that are secured not only by a Chapter 13 debtor's principal residence may be modified. The bill was referred to the Judiciary Committee. Senate and House leaders have reportedly made it clear that the issue remains a top priority. Although it is reported that the bill is not likely to pass this year, it is expected to come up early in the next Congress in the first quarter of 2009.

Title I, Section 103 of the bill would amend section 1322 of the Bankruptcy Code to allow a Chapter 13 plan to modify, after passing a budgetary means test, a secured claim secured by the debtor's principal residence. The modification would allow one to reduce the mortgage claim down to the value of the real estate collateral, change the interest rate, and increase the term for up to 40 years. A Chapter 13 plan would also be able to provide for the waiver of any prepayment penalty.

Little Help from HUD's "Hope for Homeowners" Program

The Washington Post recently reported that the US Department of Housing and Urban Development is considering changes to its Hope for Homeowner's program only about a month after it was launched. The program was expected to help 400,000 borrowers get new loans but so far the program has reportedly only helped 42 homeowners and HUD only expects 20,000 application over the next year. The program was originally expected to help 400,000 borrowers. but lenders have balked at a requirement under the program to lower the principal owed on the loan to qualify for a refinancing under the program.