WASHINGTON (1/28/09)—The House Judiciary Committee late Tuesday approved mortgage bankruptcy reforms but made a few changes as it marked up its bill (H.R. 200). Voting 21-15 along party lines for the Helping Families Save Their Homes in Bankruptcy Act, the committee ended up okaying a bill with notable improvements from the original. The committee approved a manager's amendment offered by the bill's sponsor, Rep. John Conyers (D-Mich.). The original bill would have given bankruptcy judges unfettered authority to change—or “cramdown”-- a borrowers’ mortgage loan terms, a provision strongly opposed by the Credit Union National Association (CUNA) and other financial services groups. In its amended version, the committee-approved measure would:
* Limit the application of the bill to mortgages made prior to the date of enactment; * Require borrowers to contact their lender or servicer at least 15 days prior to petitioning a bankruptcy court; * Allow lenders to share in the appreciation of a home's value with borrowers who discharge mortgage debt in bankruptcy, if the house is sold while the Chapter 13 plan is in effect, which typically is 5 years; and * Prohibit the Act from being construed as modifying any obligation of the Federal Housing Administration, the Veterans Administration, or the Department of Agriculture, under a contract that guarantees or insures the payment of any part of a loan secured by a security interest in a principal residence.
The committee also ringingly endorsed an amendment that would exclude borrowers who misrepresent their financial situation in bankruptcy from being eligible to have their mortgage crammed-down. The vote on this amendment was 21-3. Despite the improvements, Ryan Donovan, CUNA vice president of legislative affairs, said CUNA remains opposed to the bill. He said CUNA understands that a small number of Democratic committee members withheld amendments to the bill and will continue to try to work with the chairman as the bill proceeds to House floor consideration. That, Donovan said, could come as early as next week.