March 5, 2009

U.S. Rep. Ed Perlmutter (CO-07), member of the House Financial Services Committee and a member of the New Democrat Coalition, voted in favor of legislation today to help families who are facing foreclosure. Perlmutter was instrumental in pushing House leadership to clarify bankruptcy language included in the bill to make sure homeowners were treated equitably and the bankruptcy system was adequately equipped to handle the loan modifications.

“Stabilizing the housing market is central to restoring the American economy,” Perlmutter said. “Even in Colorado , we are seeing a quarter of homes worth less than the purchase price. We all stand to lose if we do not stop the steep decline in home prices.”

“Filing for 13 Bankruptcy is a last resort option and not something individuals enter into lightly,” said Perlmutter. “However, as with business bankruptcies, allowing bankruptcy judges to modify the terms of loans for families with existing mortgages could reduce foreclosures by 20 percent and help stabilize housing prices.”

Bankruptcy is a strict process with a trustee supervising the family’s finances for up to five years and is limited to families who prove to a judge that they will be able to repay their debts – it is not an easy way out of debt.

Perlmutter continued, “I had some reservations about the initial version of this legislation, including who would be eligible for these types of modifications and could the bankruptcy system handle the volume of these modifications. After hearing from Sec. of Housing and Urban Development Sean Donovan as well as many of my constituents and businesses, I am confident this version of the bill will help ease the squeeze so many Americans are facing and strengthen the value of our neighborhoods.”

Some of the new provisions supported by Perlmutter within the bankruptcy portion of the bill include:

* Provision clarifying that the bill only applies to existing mortgages, not future mortgages
*
Requires homeowners facing foreclosure to call lenders 30 days prior to applying for judicial modification, to provide information to the lender for a loan modification offered by the lender before these homeowners can apply for judicial modification. (critical compromise worked out with in manager’s amendment)
*
Provision to share the increase in property value with the lender for five years
*
Prohibits a borrower who can afford their mortgage or a borrower convicted of mortgage fraud from modifying his or her mortgage under this legislation.
*
Those going through bankruptcy must live under the supervision of a trustee and a judge, and under the observation of creditors for up to five years, and bankruptcy can remain on credit reports for up to 10 years.

“This legislation is about fairness. It is about giving families who own one home the same rights to keep their home when they face bankruptcy as the investors and speculators who own two or three,” said Perlmutter. “Without spending one federal dollar, this legislation could keep hundreds of thousands of families across the country from facing foreclosure and losing their home.”

The Helping Families Save Their Homes Act gives bankruptcy judges the ability to modify existing mortgages for families who file for Chapter 13 bankruptcy as an incentive to spur lenders into voluntarily modifying loans. It gives lenders the confidence to modify loans by protecting them from some lawsuits. And it spurs mortgage refinancing by fixing the Federal Housing Administration’s Hope for Homeowners Program, reducing fees and offering new incentives for lenders.

###