Home loans: Fight over judges redoing mortgages

In the wake of housing crisis in US, it is being demanded to give judges the right to change mortgage terms in bankruptcy cases so that they become affordable for the borrowers. This is believed to be the quickest and safest method to save home owners under present conditions. The disadvantage here is that the lenders have to absorb the loss and will not have any more rights to change terms of loans. To top all this hassles they would be dragged to bankruptcy courts by the million of borrowers who are delinquent.

A bill that would give the judges authority to dictate new terms for loans taken for residences would alter the course of the falling housing market. The plan has supporters in the Senate and House. The Democrats more or less support this plan. It also has the backing of President Obama.  The fight against this plan is by lending industries and other businesses. They have around ten groups that are opposed to the passing of this bill. The legislation has been stopped due to their active lobbying against it. They are believed to have spent around eighty three million dollars in lobbying against this and other related issues since 2008. This figure is an example of the strength and power of the banking, investing and other business industries and their reporters.

The lobbyists have their own reasons for opposition. The chief lobbyist of Mortgage Bankers Association claims that with the passing of the bill, borrowers would have to pay a higher rate of interest and down payments would also become bigger. This they claim is the risk associated worth giving judges authority to change loan terms. The association has a 23 member team that deals with government affairs and they are trying their level best to do away with the bankruptcy legislation. The team comprises of 6 lobbyists and 9 policy makers.

In reality the solutions that are being recommended would not cost the borrowers money but would certainly hurt lenders and investors who have mortgages. This legislation is believed to be a part of the economic stimulus package of the Obama government.

Loan modifications done through lenders are a nightmare; claim many borrowers. It takes at least thirty days for the application process alone. Sometimes the lenders do not want to encourage modifications and thus resort to being non responsive to the borrowers calls and letters. The industry actually has programs where in loans can be modified to suit the present financial conditions of borrower.

The Democrats need sixty votes to pass the bill in the Senate. They have even got the green flag from 10 Democrats who were against it last year. Durbin, the chief promoter of the bill would work with President Obama to get the bill into the ‘must pass’ legislations.  The biggest opposition to the bill is form US Chamber of Commerce. This organization is believed to have spent at least fifty eight million dollars in lobbying. The American Bankers Association spent seven million dollars and Mortgage Bankers Association spent four million dollars according to Center for Responsive Politics.