Bankruptcy Attorney Blog Archives

In a speech delivered in Arizona outlining his administration’s plan to stem the growing number of foreclosures in the United States, President Obama announced that he will ask Congress to change bankruptcy law to allow judges to modify mortgages.

It was the first formal announcement that the administration is looking for the change to be passed, in the past the President had said he supported the measure and would sign it.

Housing advocates and Congressional Democrats have been pushing for the changes to bankruptcy law since late last year. They say that banks have been slow to modify troubled mortgages becuase there is no risk that modifications will be forced upon them.

Many lenders say the change will increase the cost of making mortgage loans and drive up interest rates for all borrowers.

Citigroup, under pressure from the government, announced in January that it would support changes to the bankruptcy law for loans that originated before the law is enacted. 

The plans announced by President Obama to slow foreclosure rates are similar to plans implemented by the Federal Deposit Insurance Corporation at IndyMac Bank in California.

Trade groups, like the National Association of Home Builders, have sought an expansion of foreclosure mitigation efforts to put a floor under droping housing values, along with incentives to get more people to buy homes like the ones included in the $787 billion stimulus bill the President signed yesterday in Denver.