The Senate is set to vote on ending debate on the Foreclosure Relief Act. This bill's most controversial provision would allow bankruptcy judges to reset the value of a homeowner's mortgage to the actual value of the home. In a typical example, a home that had sold for $300,000 in 2005 might be worth only $240,000 today, and the bankruptcy judge could set the value of the loan to $240,000.
Proponents claim the bill would help keep hundreds of thousands of homeowners in their homes and preserve the character of neighborhoods that could otherwise be filled with abandoned homes. In addition, this proposal is at basically no cost to the government which is appealing to most taxpayers.
Leading the opposition are mortage bankers who would bear the brunt of the bill's provisions. In addition to the immediate write downs they would have to absorb, they suggest that new loans would be made at higher rates to reflect their losses on old loans.
If you feel that something needs to be done to stem the tide of foreclosures, you might want to contact your Senators to let then know how you feel on this issue.
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