A top Democrat on Monday warned the nation’s banks that, unless they get more aggressive in modifying mortgages to prevent foreclosure, Congress will renew previous efforts to empower families to keep their homes through bankruptcy. But Sen. Richard Durbin (Ill.), the upper-chamber’s second ranking Democrat, also gave the banks three months to comply with his ultimatum — a span over which roughly 1 million new homeowners are projected to enter foreclosure.
Congress and White House officials have created a series of programs designed to entice mortgage lenders and servicers to modify troubled loans voluntarily, but those efforts haven’t kept pace with an ever-rising number of foreclosures, which have already topped 1.5 million since January. The issue has plagued lawmakers, who have spent hundreds of billions of dollars propping up the nation’s banks, but have provided little in direct help for families caught in the swirl of the housing crisis, which was at the root of the current recession.
Durbin is the sponsor of legislation to alter the bankruptcy code to allow judges to trim, or “cramdown,” the terms of primary mortgages to keep people in their homes — an option current law doesn’t permit. The Senate killed the proposal earlier in the year, but it could resurface if foreclosures continue to rise and the banks continue their reluctance to cut mortgage rates on their own. Durbin, for his part, thinks the bankruptcy change can’t come soon enough.
“The voluntary efforts by some banks to slow the foreclosure crisis and stabilize America’s housing market have not worked,” Durbin said during a housing forum at the Center for American Progress Action Fund. “Whether the bankers and mortgage servicers are failing because of intransigence or incompetence doesn’t matter … They have to do much better.”
Read more at the Colorado Independent’s sister site in the nation’s capital, The Washington Independent.