Citibank supports Senate Bill 61 to allow Loan Modifications to Home Mortgages
Posted on Jan 9, 2009 in Chapter 13, Foreclosure - Saving Your Home, Uncategorized
Senate Bill 61, introduced by Dick Durbin (D. IL), is entitled Helping Families Save their Homes. This bill, if enacted, would allow borrowers to use chapter 13 to modify their mortgages, even if they couldn’t cut a deal with their lender outside of bankruptcy. Mortgages could be marked down to the present value of the house. The rest of the loan would be paid under a chapter 13 plan over a period of five years – and not necessarily at 100% either. Interest rates could be cut. Prepayment penalties would be out. Consumer protection claims would be preserved. No more flim-flam junk charges on mortgages would be allowed either.
Sounds good? Well not to most mortgage lenders. They are geared up to fight this tooth and nail. The American Bankers Association still opposes using Chapter 13 to modify home loans.
BUT – In a stunning turn of events, Citibank now supports this legislation. How did this happen? Here’s the deal. The new law would apply only to mortgages in existence at the time the legislation was passed. And the borrower would have to first show that he or she tried to get a loan modification before going into chapter 13 bankruptcy. There are other points too – but these are the main ones.
Remember, making laws in Congress is a lot like making sausage – the end product may taste good but the manufacturing process isn’t pretty. Stand by – we’ll keep you informed.