Measure was expected to pass this week
A scuffle between House Democrats has brought legislation to help debt-strapped homeowners to a halt. The bill would let bankruptcy judges reduce the principal and interest rate on mortgages.
The main point of contention centers on this question: Is it fair to help only those who are facing bankruptcy and not others struggling to make mortgage payments on homes that are now devalued?
Democrat vs. Democrat
Debaters seem to fall into two camps: traditional Democrats and moderate Democrats, including members of the business-minded New Democrat Coalition.
Coalition head Rep. Ellen Tauscher points out that the measure only helps homeowners facing bankruptcy and other extreme circumstances. The coalition says there are people out there who can make their payments, but still deserve help.
“There’s an equity question here,” said Rep. Ed Perlmutter, another member of the coalition. “The discussion has got to be, what’s the benefit to the guy next door who is struggling to pay the bills, is paying the bills and isn’t filing for bankruptcy?”
Third party problems
While the New Democrat Coalition is seeking more help for struggling homeowners, banks are lobbying for less. Last year, a banking industry lobbying effort managed to kill a similar bill.
They are still advocating that protection and aid only be extended to homeowners with subprime or other “exotic” loans.
Compromise
The mortgage industry argues that the costs the could incur from reducing existing mortgages will only cause them to have to raise interest rates for future borrowers.
Bank lobbyist have gotten House Democrats to agree to limit the measure to loans that have already been made. Also, borrowers must show they tried other ways of modifying their loans.
What now?
The House vote on the bill, which was originally scheduled for today, has been pushed to Tuesday. The Senate is expected to vote on the measure in about two weeks.
There is a modicum of truth to this. Those homeowners that are struggling but getting by deserve a bit more help. Those who bit off more than they could chew, whether they got a loan through ACORN or not, and were reckless and irresponsible shouldn’t be helped; they brought it upon themselves. I also don’t understand why they would have to raise any rates – if you only loan to customers that always pay then its guaranteed income.