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Bill Would Let Bankruptcy Judges Alter Mortgage Terms
The House Judiciary Committee on Dec. 12 completed its markup of H.R. 3609, the Emergency Home Ownership and Mortgage Equity Protection Act of 2007.
Introduced by Rep. Brad Miller (D-N.C.), the measure would allow bankruptcy judges to reduce the value of a home loan, extend the terms of the loan, lower the interest rate, delay the effective date of an adjustable rate increase and make other similar changes to a mortgage for home owners going through Chapter 13 bankruptcy proceedings.
NAHB is concerned that this legislation would add substantial new risks to investors in the secondary market. The likely effect would be to reduce liquidity, make it more difficult for borrowers to obtain a mortgage or refinance, and increase mortgage rates.
In a joint letter sent to the committee by NAHB and several other trade associations, it was noted that “H.R. 3609 will actually cause harm to future home buyers. Last week, during a hearing in the Senate Judiciary Committee, several economists testified that granting bankruptcy judges new powers to alter the terms of a mortgage will increase the cost of mortgages for all future borrowers.”
The potential for higher mortgage rates is a big concern, as even a small increase in mortgage rates will force millions of Americans from the marketplace.
The committee approved the bill by a mostly party-line vote of 17 to 15, with only one Republican voting in favor, after adopting a compromise agreed to by Chairman John Conyers (D-Mich.) and Rep. Steve Chabot (R-Ohio).
While the compromise does limit the scope of the bill, it may only serve to undermine the Administration’s efforts to encourage voluntary loan restructuring by incentivizing bankruptcy while adding uncertainty to the mortgage finance market.
To view the legislation, click here and type the bill number in the box in the upper center screen.
For more information, e-mail J.P. Delmore at NAHB, or call him at 800-368-5242 x8412.
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