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Mortgage Bankers Association Threatens to Kill Bankrutpcy Bill
I think we have to credit the MBA argument. I find myself asking if
this bill is truly a good idea?
Why not let the market liquidate the assets and let the borrowers take
responsibility for their decisions?
Of course, as an advocate for debtors, I'll use every tool that the
geniuses in Congress send my way. But as a citizen, I have to wonder
if this is not foolishness.
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January 25, 2009
Fight Building Over Judges Redoing Mortgages By THE ASSOCIATED PRESS
Filed at 1:06 p.m. ET
WASHINGTON (AP) -- Most congressional Democrats say the quickest way to
save homeowners like Troy Butler of Saginaw, Mich., is to let them
declare bankruptcy and allow judges to dictate new mortgage terms.
Easy, except the lenders that would absorb the pain -- and lose control
of any deals to ease the terms -- do not want to get dragged into
bankruptcy court by millions of overextended borrowers.
Butler, 40, is a laid-off General Motors worker who has filed for
bankruptcy. But the bankruptcy court has no authority to change the
terms of his $90,000-plus mortgage that is more than double the value of
his home.
A bill to give judges authority to alter loan terms for primary
residences may be the quickest way to arrest the housing market's
collapse. Most Democrats in the House and Senate support that plan.
President Barack Obama told Democratic leaders Friday he also backs it,
according to a Senate aide who was not authorized to be quoted by name.
But 10 groups representing the lending industry and other businesses are
fighting back fiercely. Several have engaged portions of their lobbying
machines to stop the legislation. The groups spent $83 million in
lobbying on multiple issues in 2008, a figure that shows the power of
the banking and investing industry and their business supporters.
One Democratic backer of the bankruptcy proposal, Rep. Maxine Waters of
California, said the banking industry ''has owned this Congress far too
long.''
Butler, the GM worker, and an industry lobbyist see things much
differently.
''I'm living from day to day, hoping to make it through the day. I worry
about my family, where we're going to live, how we'll survive,'' said,
Butler, who has a disabled wife and two children, ages 15 and 11.
The chief lobbyist for the Mortgage Bankers Association, Steve O'Connor,
said new homebuyers would end up paying higher interest and bigger down
payments if lenders are saddled with the risk that a judge could change
mortgage terms.
''We're going to defend the industry'' against ''bad public policy,''
O'Connor said.
The association's 23-member government affairs team is trying to
persuade lawmakers to kill the bankruptcy legislation. The team includes
six lobbyists and nine policy experts who double as lobbyists, said
O'Connor, senior vice president of government affairs.
The bankruptcy solution would not cost taxpayers money, as would
mortgage modification programs that could become part of the
government's huge economic bailout package. But it certainly would harm
the bottom line for lenders and investors holding mortgages.
The lending industry has voluntary programs in place to change mortgage
terms. But Butler's lawyer, Peter Bagley, said it was a nightmare trying
to contact his client's lender.
First, he was told the application for a loan modification would take at
least 30 days to process. Bagley then called someone with authority to
stop any sale of the home, but only received voice messages that the
mailbox was full. The application never arrived.
The key to passage of the bankruptcy bill is the Senate, where Democrats
need 60 votes to stop a possible filibuster. Ten Democrats -- all still
in the Senate -- would not back the plan in a vote a year ago.
Sen. Dick Durbin, D-Ill., the chief Senate sponsor of the bill, said
Obama persuaded him in a White House meeting Friday to remove the
bankruptcy proposal from an economic recovery package -- to ensure it
doesn't jeopardize the stimulus bill. But Obama pledged his support for
the bankruptcy solution, Durbin said.
Obama said he would work with Durbin to attach the proposal to other
''must pass'' legislation -- with the hope that supporters of the
overall bill would not vote against it because of the bankruptcy
provisions.
Of the 10 organizations that asked the House Judiciary Committee to
oppose the bill, the largest is the U.S. Chamber of Commerce. It spent
$57.9 million on lobbying in 2008, according to the Center For
Responsive Politics, an organization that tracks lobbying expenditures
and political donations.
The Mortgage Bankers Association, which represents 2,400 member
companies in the real estate property industry, spent $3.8 million and
the American Bankers Association totaled $6.8 million.
M. Erik Clark
Borowitz, Lozano & Clark, LLP
100 N. Barranca Avenue, Suite 250
West Covina, CA 91791
www.blclaw.com
Office: (626) 332-8600
Fax: (626) 332-8644
Board Certified in Consumer Bankruptcy
American Board of Certification
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