Frank to Revive Cramdown to Curb Foreclosed Homes Auctions
The cramdown bill which was rejected by the Senate in April will be revived by Massachusetts Democratic Senator Barney Frank, chairman of the House Financial Services Committee, if mortgage lenders do not step up their efforts to modify loans and cut down the number of properties going into foreclosed homes auctions.
The cramdown bill refers to the judicial modification bill which was passed by the House in March but subsequently rejected by the Senate the following month. The bill aimed to help distressed homeowners use bankruptcy proceedings to reduce their monthly loan payments so they can save their houses from foreclosed homes auctions.
Under the bill, federal judges would get the authority to reduce interest rates, extend loan terms and reduce loan principal amounts to enable homeowners to make their monthly payments and keep their units from foreclosed homes auctions.
Back in March and April, the banking industry, including the American Bankers Association, fiercely opposed the bill, but House members passed it because of calls from their constituents who are struggling from the recession and from the threat of foreclosed homes auctions.
In a statement released this week, Committee Chairman Frank pointed out the fact that Congress gave to the mortgage industry all the legislative tools they requested to be able to modify loans, and yet, the mortgage industry has only about 180,000 loan modifications to show as their accomplishment after about four months since the launching of the Making Home Affordable Program.
The program aimed to help about 4 million troubled American homeowners.
Frank warned the mortgage servicing industry that there is a strong chance the judicial modification will pass during its revival because of a stronger argument for its passage. He stated in strong terms that if recent efforts by federal officials to work together with mortgage lenders are not able to produce significant increases in loan modifications, he will revive the cramdown bill.
This week, Treasury Secretary Timothy Geithner met with representatives of the top 25 mortgage banks in the country and had them pledge to modify at least 500,000 loan modifications by November 1.
Based on the statement released, Frank warned he will attach the cramdown proposal to any new legislative bill introduced by the financial industry, unless lawmakers see a substantial increase in loan modifications and significant decreases in properties entering foreclosures and foreclosed homes auctions.
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