This is a case of good news, bad news…and really bad news.

The good news is that the U.S. Senate is finally moving on two crucial pieces of legislation, credit-card reform and the proposal to grant bankruptcy judges the power to modify loans on primary residences–and the credit-card legislation looks to have significant traction.

The bad news is the mortgage-lending lobby seems to have already persuaded enough senators to move against such “cram-down” powers–even though judges do have the exact same power for luxury items. In other words, judges can now modify terms on such items as yachts, snowmobiles, and even vacation homes but do not have the power to modify terms for consumers struggling to save the houses where they live. (Of course, even without the logical improvement, the bankruptcy code remains a powerful tool for providing relief, including saving a home from foreclosure.)

As CNBC.com reports today: “Senate Majority Whip Richard J. Durbin (D-Illinois) has managed to get a vote scheduled today on his controversial plan to help homeowners avoid foreclosure, but the bill’s chances of approval are slim, say congressional and industry sources.” Read the rest of this entry »

New legislation aimed at the major roadblock to helping distressed homeowners passed the House March 5, when the Helping Families Save Their Homes Act of 2009 was approved via a vote of 234-191. If it gets Senate approval, bankruptcy judges will gain the power to modify terms of loans for some homeowners–an ability already in place for commercial property and nonessentials such as vacation homes, yachts and snowmobiles.

Support for the measure in the Senate is unknown, with various news sources citing low regard among Senate GOP leaders as well as a few Democrats, while others indicate the necessary votes may already be lined up. For example, an AP story on the NPR Web site says of the bill, “It faces a tough road in the Senate, where Republicans and some Democrats oppose the idea.”

But a Marketwatch account, while acknowledging that Senate support “is unclear,” also reports that “Senate Majority leader Harry Reid, D-Nevada, said he believes he has the votes to confirm passage. The measure will likely require the support of a few GOP Senators. A spokeswoman for Sen. Mel Martinez, R-Fla., said he is considering the legislation. Like many other states, Florida has an unusually large number of troubled homeowners and foreclosures.” Read the rest of this entry »

Flush with a legislative victory, President Obama is scheduled to appear in Denver Feb. 17, when he will sign the $787 billion economic stimulus bill passed late in the day Feb. 13.  Hopeably, the bill’s passage on a Friday 13th won’t turn out to be a bad omen. That is, maybe some of the money and relief will actually reach people who need help this time–unlike the “bailout” funds that banks hoarded when the government made its little oopsie last fall and forgot to require even a minimum of loans targeted toward distressed homeowners.

After Tuesday’s signing at the Denver Museum of Nature & Science, the president leaves the Rockies for a Wednesday jaunt to Phoenix, where he’s expected to present his plan to stanch the hemorrhage of nationwide home foreclosures.

But Obama has a little public relations oopsie of his own: Part of the reason for the visits to Denver and Phoenix, according to a Chicago Tribune reporter, is “to refocus attention on ordinary people who might benefit from seeing the stimulus enacted.”

You know, slip out of the Beltway and mingle with the real folks… hunker down with the plebes… Well, apparently ordinary citizens got a shot at tickets to the Phoenix event, but the signing of the new bill is–according to the Denver museum–closed to the public. Posted at the museum’s Web site the day before the event, the explanation reads somewhat tersely: “This White House event is for invited guests only, and all tickets have been distributed. There are no remaining invitations.”

Oh, well, at least the hoedown for “Teachers, PTA members and school administrators” later that evening won’t get the kibosh: “Spring Educators Night scheduled for 5:30 p.m. on Tuesday evening will still go on as planned.” …whew!

Public relations gaffe aside, the event in Phoenix may well herald an historic shift in power. Since 1979, bankruptcy judges presiding over a Chapter 13 filing have not been able to modify mortgage terms on a primary residence. Astonishingly enough, using what lenders disparage as “cram down” powers, a judge can lower the amount owed on autos, boats, credit cards–and even a vacation home. But for decades, the mortgage-lending lobby has managed a white-knuckle death grip on the terms of primary residence loans.

Of course, such power is completely understandable. According to a Feb. 6 piece in the Mercury News, keeping the judges’ hands off the note, “allows lenders to foreclose on delinquent homeowners to force quick recovery of what they’re owed — part of the reason why foreclosures are so numerous.

“According to the mortgage industry data firm RealtyTrac, lenders filed for foreclosure on 2.3 million homes last year, up 81 percent from 2007 and 225 percent higher than the filing rate in 2006.”

The article posits a sea change that has been at least a couple of years in the making. “For the past two years, Democratic leaders in the House and Senate have been pushing for a change in the bankruptcy law to include principal residence loans on the list of debts that can be ‘judicially modified’ — crammed down — by the courts. They argued that banks and mortgage companies too often have been unwilling to offer delinquent borrowers serious modifications on loans because they have the option to pull the plug and foreclose.

Read the rest of this entry »