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Bankruptcy Provision Puts Snag in Senate Housing Bill
Senate Republicans last week blocked a housing bill (S. 2636) introduced by Senate Majority Leader Harry Reid (D-Nev.) containing a controversial bankruptcy provision that could actually prolong the mortgage crisis. A 48 to 46 vote fell 12 short of the 60 needed to halt a threatened filibuster and proceed to a debate on the legislation.
While the bill contains many positive elements supported by NAHB — including provisions that would expand the mortgage revenue bond program and allow businesses to carry back net operating losses for five years — the legislation would do more harm than good because of its contentious bankruptcy language. This provision 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.
This would create substantial new risks for investors in the secondary market, according to analysts at NAHB. It would most likely reduce liquidity, make it more difficult for borrowers to obtain a mortgage or refinance, and increase mortgage rates.
Senate Democrats have indicated that they will attempt to renew debate on the housing package in the near future. NAHB continues to urge senators to remove the bankruptcy provision from the bill before moving forward.
To read the legislation, click here and enter S. 2636 in the box at the center of the page.
For more information, e-mail J.P. Delmore at 800-368-5242 x8412.
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