Bankers say no way to proposed mortgage bankruptcy changes


It's war!

The Mortgage Bankers Association has just fired off a letter to Congressional leaders opposing in no uncertain terms the expected introduction of a so-called mortgage bankruptcy "cram-down" amendment to the Wall Street Reform and Consumer Protection Act. The amendment will be put forth by Representative John Conyers, Democrat from Michigan.

Many economists believe -- as do I-- that the only real way to put the brakes on foreclosures is to allow bankruptcy judges, in certain cases, the flexibility to not only reduce mortgage interest payments but also the actual principal of the loan. They already can do this for second vacation-type homes (meaning, oddly, the rich can take advantage of this should they face foreclosure on their second property) but , under current law, cannot touch the principal on primary mortgages.