Mortgage Crisis: Judges to the Rescue?

Democrats back plan to let jurists change loan terms
By Kevin Spak,  Newser Staff
Posted Feb 26, 2008 1:00 PM CST
A foreclosure sign tops a sale sign outside an existing home on the market in northwest Denver in this photograph taken on Wednesday, Aug. 29, 2007. Colorado's housing industry continued its slide in...   (Associated Press)
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(Newser) – Over the loud objections of lenders, Senate Democrats are lining up behind a plan to give bankruptcy judges the power to alter mortgages, the LA Times reports. The proposals could go to the floor as early as today. “This bill will have more impact… than any other option currently on the table,” said Jack Kemp, housing secretary in the first Bush administration.

Republicans are generally backing lenders, who say they’d be forced to increase rates by as much as 1.5%. “It will amount to a new tax on homeowners,” said a Mortgage Bankers Association official. Arlen Specter is forwarding a less radical plan, which would have an expiration date and give the lenders veto power on some changes.