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Published: February 2009

Court-supervised loan modifications crucial to stopping foreclosures

Coalition: Mortgage

Consumer Action, along with its coalition members, sent a letter urging Congress to support loan modifications via bankruptcy court, which would be an immediate and effective way to reduce foreclosures.

Last week, President Obama unveiled a comprehensive set of new initiatives to help millions of American homeowners and reduce the massive wave of foreclosures that lie at the root of today’s economic crisis.  The plan recognizes that voluntary industry-led programs to avert foreclosures simply have not yet worked.  Therefore, the Administration is putting in place a coordinated set of options and incentives to servicers and investors to prevent foreclosures that do not need to happen.

An essential part of the Obama Administration plan supports congressional action to permit distressed homeowners to seek home loan modifications in bankruptcy court, an option now permitted on other types of loans that have a far smaller impact on the economy as a whole. Legislation to accomplish this critical part of the plan, H.R. 200 (“Helping Families Save Their Homes Act”), was approved last month by the Judiciary Committee.  That legislation will be part of a broader package of proposals (H.R. 1106) intended to help stabilize the housing and financial markets and expected to be considered on the House floor this week. 

We are writing today to reiterate our support for legislation that would allow for court-supervised mortgage modifications as a way to help families stay in their homes and avoid foreclosure. Judicial mortgage modification will provide a vital last resort that could prevent hundreds of thousands of foreclosures, without spending one penny of taxpayer money.  Equally important, it will be the most reliable way to encourage loan servicers to offer sustainable mortgage modifications outside of court.  The logic here is simple: We can’t end the financial crisis without stemming the rising tide of foreclosures.  Court-supervised loan modification is an essential component of an effective and comprehensive plan to meet that challenge.  

At a time when an estimated 6,600 families are losing their home to foreclosure each and every day, there is no time for delay.  We urge Congress to act immediately to pass legislation, without weakening amendments, to lift the ban on judicial modification of primary residence mortgages. It is perhaps the most important thing we can do right now to help arrest the terrible toll that the recession is taking on American families.

Other Organizations

AARP | AFL-CIO Americans for Fairness in Lending | ACORN | Black Leadership Forum | Boston Trust | Calvert Asset Management Company | CDFI Coalition | Center for Responsible Lending | City, Life and Action for Regional | Equality | Communications Workers of America | Community Legal Services Inc. | Consumers Union | Consumer Federation of America | CREA: Center for Reflection, Education and Action | DEMOS | Domini Social Investments LLC Greater Boston Legal Services | Green America | International Brotherhood of Teamsters | Lawyers’ Committee for Civil Rights Under Law | Leadership Conference on Civil Rights | Legal Assistance Corp of Central Massachusetts Massachusetts Alliance Against Predatory Lending | Miller/Howard Investments | MMA | NAACP | National Association of Consumer Advocates | National Association of Consumer Bankruptcy Attorneys | National Black Caucus of Local Elected Offiicals | National Community Reinvestment Coalition | National Consumer Law Center (on behalf of its low-income clients) | National Council of LaRaza | National Education Association | National Fair Housing Alliance | National League of Cities | National Low Income Housing Coalition | National NeighborWorks Association | National Policy and Advocacy Council on Homelessness | National Training and Information Center | National Urban League | North Star Asset Management | Opportunity Finance Network | Pax World Mutual Funds | Rural Advancement Foundation International | Service Employees International Union | Sisters of Loretto Investment Committee | Sisters of the Sorrowful Mother | UAW International Union | U.S. PIRG

More Information

H.R. 200 and H.R. 1106

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