Negotiations over bankruptcy cram down provisions in a housing bill have hit a snag and Senate Democratic leaders have put off legislative action until late April.
"(I)t looks likely that we will not be able to take up this housing bill until the next work period," said Regan Lachapelle, a spokeswoman for Senate majority leader Harry Reid. "We will continue to work with Senator Durbin and Senator Dodd to ensure we have the votes when we move this bill forward." Democratic Sens. Richard Durbin (Ill.) and Christopher Dodd (Conn.) are leading the effort to pass the housing bill (H.R. 1106) with the bankruptcy cram down provisions.
Lenders are seeking strong language in the bill to prevent homeowners they can help with a Treasury Department-compliant loan modification from opting into Chapter 13 bankruptcy where a judge can reduce the principal amount of the mortgage. Such bankruptcy protection seems acceptable to consumer groups.
But the Center for Responsible Lending wants provisions to ensure low-income borrowers are protected if they cannot afford the monthly payments under a Treasury loan modification. Lenders are concerned this could be a big loophole.
Other issues also need to be resolved. CRL president Michael Calhoun told a Women in Housing and Finance symposium that he is optimistic the Senate will pass a bankruptcy bill. "I think a bankruptcy package will come out of the Senate within the next four to six weeks," Calhoun said. The Senate returns from a two-week spring recess on April 20.