House Judiciary Members Introduce Mortgage Bankruptcy Legislation

January 6, 2009
Press Release
House Judiciary Committee Chairman John Conyers, Jr. (D-MI), Judiciary Subcommittee Chairs Linda Sánchez (D-CA) and Jerrold Nadler (D-NY), and Committee Member Bill Delahunt (D-MA) today introduced the Helping Families Save Their Homes in Bankruptcy Act of 2009, legislation identical to a bill introduced by Senator Richard Durbin (D-IL) this afternoon.

The Helping Families Save Their Homes in Bankruptcy Act makes a straightforward change to the law to give homeowners filing for bankruptcy the opportunity to restructure their loans so that they can save their homes from foreclosure just as they can with virtually any other asset, including vacation homes, family farms, and boats. Specifically, the bill would empower bankruptcy judges to modify mortgage terms to help homeowners stay in their homes.

"The economic turmoil we are experiencing is a direct result of the burst housing bubble," said Conyers. "Foreclosure is now expected to claim more than 8 million homes by 2012 - 16% of all mortgages in America. To set our economy on the path to recovery, we need to strengthen our communities by taking steps to stabilize the home mortgage market. Giving homeowners the chance to restructure their loans will help more families avoid foreclosure.

"The effect of the stimulus package on our economy will be greatly diminished if we can't keep families in their homes. We need to break the continuing cycle of foreclosure that threatens cities and neighborhoods across the country. After spending $700 billion to keep the financial markets afloat, our bill will finally provide the help homeowners need and won't cost the taxpayers a dime."

"The problems we are seeing in the economy started with the mortgage meltdown in the subprime market," said Sánchez. "To make the economy bloom again, we need to plant the seeds of recovery in the housing market. As the law currently stands, judges can restructure debt on second homes, vacation homes -- even yachts and private jets, but not on a debtor's first home. I think that is fundamentally unfair. There is no reason why average Americans should not have the same legal protection to save their family homes."

"Inexplicably, home mortgages are virtually the only debts that cannot be modified in bankruptcy," said Nadler. "Millionaires can change mortgage terms to save their vacation homes and investment properties, and corporations can modify loans on airplanes and factories, yet homeowners alone cannot - under any circumstance - save the family home by altering the terms of their loans. Attempts by Congress to allow lenders the discretion to voluntarily modify mortgages have not produced the desired results. Congress must now act to afford homeowners the same protections enjoyed by businesses and the very rich.”

“With the number of foreclosures expected to rise and loan modification programs proving to be ineffective, the Congress has no other choice but to take much more aggressive measures to get the mortgage crisis under control and help Americans stay in their homes,” said Delahunt. “The bursting of the housing bubble has created widespread collateral damage on Wall Street and throughout our entire economy, and this legislation will help millions without any expense to taxpayers.”