I’m upset this morning to find once again that our senators can so easily be bought. LA Times reports that the mortgage reduction bill failed to pass the Senate. The bill would have allowed bankruptcy judges to reduce the principal owed on an existing mortgage thereby reducing the payments. The crazy thing is that judges can already do this for businesses, and can do it for private vacation homes, cars and boats. So this bill would simply have put primary residences in the same category. From the article sounds like senators, both Democrats and Republicans, were influenced by the powerful banking lobby. Though many senators were furious that after giving all this money to the banking industry, the industry now comes around to kill any consumer protections.
Here’s the problem. My husband has his own real estate company, and he says that the people at the banks that he talks with to try to do work-outs of loans these days don’t know what they are doing. Usually they are low-level employees who have no authority to make decisions that are obviously going to benefit both the lender and borrower. So even though Congress and the President have said from the bully pulpit that banks need to work with borrowers to prevent foreclosures, the banks really aren’t doing it and they need a major push to change their systems down to the front-line employees to make it happen.
The power of this bill isn’t as much in the actual use of it as it is in the threat of the use of it to provide a big enough catalyst that forces banks to change the way they do business such that they are doing work-outs on their own when it makes sense.
This bill passed the House but the speculation is that it won’t get revived when the two bodies come together on it. If you want to do something, find out how your Senator voted and shoot them an email.