Immediate Release: August 1, 2011
WASHINGTON, D.C. – Today, Congressmen Jim McDermott (D-WA) and Steve Cohen (D-TN) introduced legislation to help struggling families keep their homes. The measure would clarify the authority of bankruptcy courts to operate mortgage modification programs.
“The continuing, and often unnecessary, rush to foreclosure in the U.S. housing market continues to threaten millions of American families and drag down the economy,” said Congressman McDermott. “The administration said more needs to be done and I couldn’t agree more. This bill will ensure that homeowners have the chance to sit down with their lenders and discuss options to stay out of foreclosure.”
The McDermott/Cohen bill, titled the “Limiting Investor and Homeowner Loss in Foreclosure Act,” was crafted to encourage debtors and secured lenders to come together to discuss mutually beneficial resolutions of their mortgage difficulties and to facilitate resolution by opening the lines of communication. Current bankruptcy courts with a mediation and loss mitigation program in place have been quite successful, which is proof positive bankruptcy courts can play an important role in helping facilitate successful voluntary loan modifications.
“Memphis has been hit hard by foreclosures,” said Congressman Cohen. “Foreclosures evaporate middle class wealth. Our bill would help families keep their homes and avoid the stress and difficulties of foreclosure by giving them and their lenders the chance to sit down with each other so they can modify their loans.”
While many bankruptcy courts have successfully used mediation and loss mitigation programs to help homeowners keep their homes, but several banks have challenged the legal authority of bankruptcy courts to carry out such programs. The Cohen/McDermott legislation would clarify that bankruptcy courts already have the authority to operate voluntary mortgage modification programs.