This editorial appeared in The Anchorage Daily News.
Legislation before Congress would allow bankruptcy court judges to drop mortgage payments to levels that strapped homeowners could afford to pay. As bankruptcy law stands now, a judge can rewrite terms of loans for cars, boats, business, factories and vacation homes – but not the home where you and your family live. This makes no sense in a country where the family home is most Americans' most valuable asset.
Without the bankruptcy option, millions more foreclosures will continue to drag the housing industry and the economy down. Millions of foreclosures will also hurt the banking business, because in a downward spiral, who's going to buy those foreclosed homes?
But the banking and finance industries are – with the major exception of Citigroup – fighting the legislation. They offer dire warnings that mortgage rates for future home buyers will rise to offset losses imposed by bankruptcy courts.
Shed no tears for the lenders. They'll miss no meals. The lenders opposing bankruptcy reform have received billions in taxpayers' bailout money, but done little to loosen credit or stem the tide of foreclosures. So far, they have taken care of themselves, resisted accountability and shown that their interests are not always synonymous with the national interest.
And they've already won concessions from Congressional Democrats on the bill – only existing mortgages would qualify and homeowners would have to give their lenders 15 days notice of their intent to file for bankruptcy – thus giving lenders a chance to offer their own restructured deal. Rep. John Conyers, chairman of the House Judiciary Committee that heard the bill Tuesday, agreed in principle that lenders share in any profits a bankruptcy property may produce later, when sold in a recovering economy.
To read the complete editorial, visit The Anchorage Daily News.