Senator Dick Durbin, D-Ill. is pressing for a mortgage modification proposal that would allow bankruptcy judges to modify Chapter 13 bankruptcy debtors' mortgages on their primary residences. Senator Durbin does not believe that voluntary efforts will stem the foreclosure crisis we are currently facing and hopes to take more proactive measures at stemming the crisis.
"With the economy officially in a recession and the foreclosure rate continuing to rise dramatically, voluntary efforts to stop the economic slide are not enough," Durbin, chairman of the Financial Services and General Government Appropriations Subcommittee, said.
I would agree with Senator Durbin's conclusions. It doesn't seem that the financial titans are doing enough to stop the wave of foreclosures hitting America. Even the loan modifications that they are offering homeowners facing foreclosure don't seem sufficient enough to reverse the foreclosure trend. More than half of modified mortgage loans became delinquent again within six months, once again placing those homeowners at risk for foreclosure.
If this proposal becomes law, bankruptcy courts need to make sure that modified mortgages are truly designed to help homeowners avoid future foreclosure.