Congressman Johnson encouraged by mortgage bankruptcy compromise

If passed by the Senate and signed into law – H.R. 1106 – Helping Families Save their Homes Act of 2009 would empower judges to reduce amount of principal owed, cut the interest rate or extend the length of a loan for a homeowner struggling with their mortgage.

The Fourth District, long plagued by high foreclosure rates, is projected by the Center for Responsible Lending to have more than 10,200 foreclosures this year. According to RealtyTrac, there were more than 1,200 Fourth District homes in the foreclosure process in January 2009 alone.

“Many of my constituents have been targeted for many years by unscrupulous lenders who have taken advantage of them with predatory loans,” said Johnson. “It has caused havoc within many neighborhoods back home. This bill begins the turn around of that unfortunate situation.”

Today, bankruptcy courts are unable to rewrite home loan terms for primary homeowners despite the fact that they lie at the center of the foreclosure problem.

“Stabilizing the housing market is the first step and key to reviving the American economy, and restoring confidence in the markets,” said Johnson. “If our neighbors suffer foreclosure, it hurts all of us.”

The bill as passed will require homeowners facing foreclosure to first pursue a change in loan terms from their mortgage lender before seeking relief from a bankruptcy court.

“This bill just makes sense,” said Johnson. “It’s already possible for millionaire investors who own multiple homes to get this kind of relief in bankruptcy court. Why shouldn’t someone who owns just one home get this kind of help too? It’s a matter of fundamental fairness. I hope that the Senate will pass it by a substantial margin.”

The legislation would also fundamentally change the Help for Homeowners mortgage refinancing program passed in 2008, which helped far fewer distressed homeowners rewrite their mortgages than designed and failed to stem the rising tide of foreclosures.