Emergency House Bill Saves Home Mortgages

The US Congress may be taking steps to save homeowners with sub-prime mortgages from foreclosure.  Bills in the House of Representatives and Senate offer hope that a new tool will soon emerge for protecting homes from foreclosure using bankruptcy.  A detailed look at the legislation and the groups supporting it can be found in my recent article on Bankruptcy Law Network.

The proposed law would let a bankruptcy judge reduce and permanently fix the interest rate and even reduce the principal balance due on a residential home loan in Chapter 13.  This could save 600,000 homes from foreclosure over the next three years.

The proposed change has many well known supporters, including former secretary of Housing and Urban Development, Jack Kemp.  In a recent Los Angeles Times article, former congressman Kemp gave his wholehearted support to this small but useful change in the bankruptcy law.

It appears that many restrictions will apply under the law if it is finally passed.  A homeowner must have received a foreclosure notice, the loan must be an exotic or sub-prime loan and there must be no other, reasonable alternative left to keep the home.  However, any help for a homeowner in foreclosure is an important step to protect American families.  The public generally and homeowners specifically will benefit if congress passes this needed piece of legislation.