[StBernard] H.R. 3609: Lifesaver or Trouble?

[Westley Annis]

H.R. 3609: Lifesaver or Trouble?
Kerri Panchuk | 11.26.07
The National Association of Consumer Bankruptcy Attorneys (NACBA)
distributed a press release Monday showing some of the positives that could
be derived from the passage of H.R. 3609-a house bill that, if put into
effect, will give bankruptcy judges the latitude to adjust the terms of
mortgage loans when trying to save distressed borrowers.

In its report the NACBA quotes research from the Center for Responsible
Lending (CRL), in which the organization suggests that 600,000 of the 2
million loans scheduled for rate resets in the next year can be saved with
the implementation of H.R. 3609.

The NACBA specifically highlights U.S. Rep Charles Melancon's (D-LA)
district, which covers the Chalmette-Houma-Gonzales-New Iberia area in
Louisiana, as an example of a community where H.R. 3609 could benefit
borrowers.

"In Congressman Charles Melancon's district, there are an estimated 9,104
subprime mortgages of which about 1,696 are expected to go into
foreclosure," the NACBA's report says. "Applying CRL's data on the number of
homes that can be saved nationally if Congress acts to end mortgage
foreclosure unfairness, that means an estimated 628 homes in Congressman
Melancon's district could be spared from foreclosure."

But, H.R. 3609 has its critics. In October, the Mortgage Bankers Association
(MBA) voiced concerns when the bill passed the House Judiciary Committee's
Subcommittee on Commercial and Administrative Law.

In a statement the MBA said, "Giving judges free reign to rewrite the terms
of a mortgage would further destabilize the mortgage-backed securities
market and will exacerbate the serious credit crunch that is currently
hindering the ability of thousands of Americans to get an affordable
mortgage," said Kurt Pfotenhauer, senior vice president for government
affairs and public policy at the MBA. "The current legislation gives no
guidance as to the proper parameters for judges to modify existing loan
contracts."