Just How Involved Should The Feds Get?

Thanks to Originator Times for this article... My comments splashed throughout:

WASHINGTON, D.C. – This week the House Judiciary Committee's Subcommittee on Commercial and Administrative Law passed HR 3609, by a party-line vote of 5-4. The legislation would allow bankruptcy judges to modify the terms of a mortgage contract during bankruptcy proceedings. While the sponsors of the bill claim that it would help up to 600,000 people from losing their homes, opponents of the legislation claim that the legislation as written would drive interest rates up for everyone seeking a home loan.

(my comment: Yes, some lenders did take advantage of some borrowers. Yes, Wall Street did allow lower credit standards and in so create even more mortgage lending to be done and even more people get a home where they couldn't have before. Yes, the consumer/borrower should have known what they were signing and whether they could have handled the possible payment increases in the future with their new loan. Yes the fault should be shared by ALL involved... even the borrowers. But, when the government gets involved to this extent, ALL borrowers will end up paying higher interest costs... even the innocent ones that had nothing to do with the current market conditions.)

According to their press release, Rep. Brad Miller (D-NC) and Rep. Linda Sánchez (D-CA) who introduced the bill said the legislation “will treat home mortgages the same as mortgages on investment properties and family farms. The bill repeals a provision that prohibits a bankruptcy court from modifying a home mortgage, but allows a bankruptcy court to modify any other secured debt, including mortgages on other properties.”

By repealing the current provision for owner occupied loans, proponents to the bill claim the legislation will push interest rates on owner occupied properties significantly higher. Currently, typically investment loans carry a higher interest rate to offset the losses sustained by lenders caused by the treatment of these type of loans during a bankruptcy proceeding. Typical investment loans can be up to 1 percent higher than an owner occupied loan.

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