Defeated Bankruptcy Cramdown Proposal Being Reconsidered By Some Lawmakers In Light Of Failing Voluntary Loan Modification Program

The Washington Independent reports:

• The Obama administration has all but abandoned it, and the Senate has already voted it down. But a proposal to allow struggling homeowners to escape foreclosure through bankruptcy got a boost [last week] from a small band of House Democrats convinced that voluntary mortgage modifications aren’t alone solving the housing crisis.

• They have a point. Despite White House efforts to entice mortgage lenders and servicers to alter the terms of mortgage loans at their own discretion, participation in the program has been meager. As a result, hundreds-of-thousands of homeowners continue to face foreclosure months after the program took effect. That instability in the housing market has, in turn, stifled federal efforts to heal the banks and get them lending prolifically again. In the eyes of some Democratic lawmakers, the combination of trends is evidence enough that Congress needs to return to its bankruptcy proposal to save the homes that the voluntary strategy is not.

For more, see Band of House Dems Revisits Cramdown (As Foreclosure Crisis Worsens, Critics of Voluntary Loan Modification Program Speak Up).