Congressional Banking Bill Affects Foreclosures

Legislation sponsored by Congressman John Conyers, Jr. that would affect foreclosure proceedings, passed the House Judiciary Committee yesterday by a vote of 21-15.  The legislation would, according to an article in today’s Wall Street Journal affect cram downs.

“In key concessions to the banking industry, Mr. Conyers agreed to alter the legislation to allow court-ordered modifications only for existing mortgages and to require that borrowers contact their lender at least 15 days before filing bankruptcy. Citigroup Inc. had demanded the changes in exchange for throwing its weight behind the bill, a move that angered the rest of the industry.

In another change, the legislation will now require recipients of cram downs who resell their home within five years to share the proceeds with their lender.

The panel also added language dissuading bankruptcy judges from shrinking the principal amounts of mortgages guaranteed by the Federal Housing Administration, the Veterans Administration or the Department of Agriculture. Under current law, the government cannot guarantee or insure amounts that have been crammed down on such loans.”

Read the full Wall Street Journal article
Read the House Judiciary Committee’s statement on the bill passage
Read an article on the cram down provision