BIDEN Disappointed by Senate's Failure to Pass Important Amendment to Save the Family Home
Would have helped more than 1,300 homeowners in Delaware
United States Senator Joseph R. Biden, Jr. (D-DE), voiced his disappointment in the Senate's failure to pass a critical amendment to the Housing Relief Bill (H.R. 3221) yesterday that would have helped more than 600,000 financially-troubled families keep their homes.
The Helping Families Save Their Homes in Bankruptcy Act, introduced by Sen. Dick Durbin (D-IL), would have eliminated an outdated provision of bankruptcy code that prohibits judicial modification of mortgages secured by a debtor's principal residence after filing bankruptcy. Under this amendment (S. Amdt. 4388), loans secured by principal residences would have received similar treatment as a loan on a vacation home or family farm, so that the ability to restructure such a loan would not rise or fall based on voluntary participation of lenders, which has not worked.
"This amendment represented the best chance for a lot of families in trouble to stay in their home," said Senator Biden. "They'd still repay the mortgage, but on a schedule determined by a judge - not a bank. We would have saved thousands of families from foreclosure and paid the banks back with interest. I'm disappointed we voted down something that was a win for everyone."
The amendment would have helped more than 1,300 homeowners and families in Delaware, who have all been suffering during the recent housing turmoil. In February there were 337 foreclosure filings in Delaware's courts, up 42 percent from the same time last year. The Center for Responsible Lending has concluded that an estimated 5,551 Delaware homes will be lost between 2008 and 2009, which will adversely affect the value of over 90,000 homes with a real value loss of $390 million. The Center estimates that allowing court-supervised modifications of loans in bankruptcy would prevent 1,388 home foreclosures and save $97 million in Delaware alone.
The Helping Families Save Their Homes in Bankruptcy Act includes provisions to:
* Allow a mortgage adjustment only to families that prove that they cannot otherwise afford their current mortgage;
* Apply only to nontraditional and subprime loans that exist before the enactment of the amendment into law;
* Allow judges to reduce interest rates only to the prime interest rate plus a reasonable premium for risk;
* Allow judges to extend the life of the loan up to 30 years; and
* Require the return to the lender of any appreciated value of the home (up to the original mortgage amount) if the home is sold within five years of the court-supervised mortgage adjustment.
The amendment had tremendous support from a cross-section of organizations from around the country including the AARP, ACORN, AFL-CIO, Center for Responsible Lending, Consumer Federation of America, Consumers Union, Credit Union National Association, DEMOS, International Union, United Auto Workers, Leadership Conference on Civil Rights, National Association for the Advancement of Colored People (NAACP), National Association of Consumer Advocates, National Association of Consumer Bankruptcy Attorneys, National Association of Federal Credit Unions, National Community Reinvestment Coalition, National Consumer Law Center (on behalf of its low-income clients), National Council of La Raza, National Fair Housing Alliance, National Neighborworks, National Urban League, National Women's Law Center, Opportunity Finance Network, and Service Employees International Union (SEIU).