NEWSBYSARAH BYRNES

The word from AFFIL's Partners in Washington is that the Senate will vote on Thursday on judicial loan modifications.  Lifting the ban on these court-supervised modifications would save 1.7 million homes and $300 billion in home equity for neighbors of families facing foreclosure.  (For background info on judicial loan mods, see this previous post.)

Even though this measure would be incredibly helpful and effective in fighting foreclosures, it's not certain that 60 Senators will vote for it.  (It's already been approved by the House.)  Without 60 votes to get around a filibuster, the measure won't pass.

You can use this link to contact your Senators and make sure they support judicial loan modifications.

Senator Durbin's office put together this useful table (PDF link) showing how many homes and how much home equity would be saved in each state by lifting the ban.  Even the numbers at the state level are huge - for example, 25,000 homes could be saved in Minnesota, 43,000 in Ohio, and a whopping 206,000 in Florida.

When you contact your Senators, make sure they know just how many homes a "no" vote on Thursday will cost your state.

To garner more votes, Senator Durbin changed the amendment from a previous version.  Now, only homeowners whose lenders have refused to use other, voluntary loan modification programs can get relief in bankruptcy.

Still, the amendment is powerful precisely because banks fear facing court-supervised modifications.  The amendment creates a powerful incentive for them to modify outside of the court - which they currently aren't doing.  For more on the politics in the Senate and how the amendment has changed, see this Huffington Post article.

Last night, by a vote of 234 - 191, the House of Representatives passed H.R. 1106 largely along partly lines.  Click here to see how your Rep voted.

H.R. 1106 will allow judges to modify mortgages for homeowners forced to file bankruptcy. Consumer advocates have been pushing for this change since the housing market began to unravel, and getting the bill through the House is a great first step toward preventing up to a million foreclosures without costing taxpayers a penny.

Of course, it is only a first step.  Companion legislation still has to get through the Senate, where it may be watered down. Fortunately the Administration supports court-supervised loan modifications, and President Obama is expected to sign what Congress eventually sends to the White House.

See this previous post for more info about court-supervised loan modifications, and this post on Firedog Lake about how the bill has been changed as it worked its way through the House.

The House of Representatives will vote on whether bankruptcy judges should have the authority to modify mortgages this week, possibly as early as tomorrow (Thursday).  The bill, H.R. 1106, combines several proposals intended to stabilize the housing and financial markets and includes this important measure.

We can't end the financial crisis without stemming the rising tide of foreclosures.  Court-supervised loan modification is an essential component of an effective and comprehensive plan to meet the challenge.  See this previous post for more info about loan mods, and this PDF for more about H.R. 1106.

AFFIL members are calling Congress today to ask their Representatives to support H.R. 1106 without weakening any of its provisions.  Click here to join us - we'll provide a phone number, instructions and talking points to make the process easy.  Or, click here to email your Representative, but keep in mind that calls to Members of Congress have a bigger impact than emails.  And thanks.

Last week, I posted about judicial loan modifications, a foreclosure prevention tactic that could provide a 20% reduction in foreclosures. To save these homes, Congress needs to pass legislation to give bankruptcy judges the authority to modify mortgage loans, either by passing "stand alone" legislation for this purpose (like S. 61 and H.R. 200), or by attaching this change to a larger piece of "must pass" legislation.

So far, despite the fact that judicial loan mods could prevent a million foreclosures without costing taxpayers a penny, this proposal remains in legislative limbo. If you want to tell Congress to get moving and pass this, you can visit the AFFIL website and send them a letter.

Judicial loan mods were included in early drafts of both the Troubled Asset Relief Program (TARP)-commonly known as the bailout-and the just-passed stimulus bill. But they got pushed out of the final versions of both.

The next possibility is attaching loan mods to the big omnibus appropriations bill, which Congress will deal with after the Presidents Day recess.

During his campaign, President Obama strongly supported allowing bankruptcy courts to modify mortgages. And yet, it was the Administration that asked Congress to keep loan mods out of the stimulus bill. This was part of the effort to garner Republican support for the "must-pass" stimulus, but it sure is easy to question that decision now, since no Republicans in the House voted for the stimulus anyway.

Still, there's hope that the Administration will push to make this change happen. As recently as last week, President Obama said that it "made no sense" that judges are not allowed to change bankruptcy terms. And, although the Treasury's "Financial Stability Plan" was woefully short on measures to combat foreclosures, when introducing it last week Secretary Tim Geithner said that loan modifications will be part of their forthcoming housing plans. These housing plans are due out this week, and we're hoping they include judicial loan mods and other important provisions.

As for passing a stand-alone bill which would allow bankruptcy judges to modify loans, Representative John Conyers' H.R. 200, "Helping Families Save Their Homes in Bankruptcy Act," did make it through the Judiciary Committee in the House. (It helps that Conyers is the chair of this committee.) There's no word on when the full House will take up the bill, and the Senate hasn't addressed S. 61, which goes by the same name, introduced by Senator Dick Durbin.

We may not be able to rely on the stand-alone bills to get this change through. I spoke with one consumer advocate who worries that they don't have enough "oomph" to make it through Congress, and insiders seem to think attaching loan mods to a "must-pass" piece of legislation is a better way to go. (Apparently, "oomph" is a highly technical inside-the-beltway term.)

One more thing is worth mentioning. On January 8, Citibank came out in support of allowing judicial loan modifications. Yes, as in Citibank the bank. Other banks are still holding out and lobbying strong against the measure, but you have to smile when one of the nation's biggest banks admits this consumer-friendly idea might be a good one.

First of all, I want to thank Shannon for inviting me to post about judicial loan modifications on this great blog. It's good to be here!

As we all know, our nation is in the midst of a foreclosure crisis. 8.1 million homes are now expected to be lost, which equates to almost 1 in 6 homes with a mortgage. A few years ago Americans for Fairness in Lending (AFFIL) made an ad campaign depicting one the effects of foreclosure: you guessed it -- homelessness. [Check out our "Family in the Woods" ad here.]

Foreclosure is a tragedy in itself, and it also has had a profound ripple effect upon neighborhoods and our entire economy. The Woodstock Institute estimates that "families lose approximately 1.14 percent of their house value for every foreclosure that occurs on their block." And to read about the link between rising foreclosures and our current recession, visit the Center for Responsible Lending.

The programs the government has designed to prevent foreclosures haven't worked. Hope for Homeowners, for example, was supposed to keep 400,000 families in their homes - but has only refinanced twenty-five loans to date.

Yes, that's twenty-five total, not twenty-five hundred or twenty-five thousand.

One big problem with Hope for Homeowners and other programs is that they're voluntary. Loan servicers (the companies that collect mortgage payments and disperse them to the investors who really own the mortgages) can participate, but they don't have to. Their contracts usually pay them more for foreclosing on a homeowner than for working our a loan modification. And servicers are edgy about arranging modifications because they can be sued by the investors, some of whom stand to lose from modifications, although some may stand to gain.