Citigroup and key Senate members reached an agreement on Thursday that will bring the Helping Families Save Their Homes in Bankruptcy Act one step closer to passage.
The proposed law, introduced by Senator Durbin (D-IL) in the Senate and Rep. John Conyers (D-CA) in the House, would allow bankruptcy judges to alter or cramdown the terms of mortgages covering the homes of individuals in Chapter 13 bankruptcy. The court would be able to lower principal to reflect the actual current market value of the home, lower the interest rate, or extend the term of the loan.
Under current legislation, virtually every type of personal debt can be reduced by the court including credit card debt and, ironically, mortgage debt on vacation homes, but not the mortgage on a debtor's primary residence. According to a press release from the office of Senator Charles Schumer (D-NY) who has been working with Durbin on the legislation, this exception dates back to the 1970's when most mortgages were fixed-rate, long-term arrangements between local bankers and neighborhood customers, a situation which is rare today.
Source: Fox News