Several Democrats proposed a bill last week in the House of Representatives that would allow bankruptcy courts to alter mortgages written by so-called “predatory lenders.” The bill would save around 600,000 Americans from foreclosure, says its author, Representative Brad Miller from North Carolina.
Some 5 million adjustable-rate mortgages are slated to reset over the next 18 months, and loan modifications are still “few and far between,” Miller said in an interview. “Everyone will know what will happen in bankruptcy, so the fact that bankruptcy is an option would lead to negotations” between the borrower and lender ahead of that event, he said.
Countrywide Financial Corp says it has modified terms on 17,000 mortgages this year. But throughout the industry, a Moody’s Investors Services “found that lenders eased borrowing terms on just 1 percent of subprime mortgages with interest rates that reset in January, April and July.”