Fight building over mortgages
Role of judges is questioned
WASHINGTON - Most congressional Democrats say the quickest way to save homeowners like Troy Butler of Saginaw, Mich., is to let them declare bankruptcy and allow judges to dictate new mortgage terms.
Easy, except the lenders that would absorb the pain - and lose control of any deals to ease the terms - do not want to get dragged into bankruptcy court by millions of overextended borrowers.
Butler, 40, is a laid-off
A bill to give judges authority to alter loan terms for primary residences may be the quickest way to arrest the housing market's collapse. Most Democrats in the House and Senate support that plan.
President Obama told Democratic leaders Friday he also backs it, according to a Senate aide who was not authorized to be quoted by name.
But 10 groups representing the lending industry and other businesses are fighting back fiercely. Several have engaged portions of their lobbying machines to stop the legislation.
One Democratic backer of the bankruptcy proposal, Representative Maxine Waters of California, said the banking industry "has owned this Congress far too long."
Butler, the GM worker, and an industry lobbyist see things much differently.
"I'm living from day to day, hoping to make it through the day. I worry about my family, where we're going to live, how we'll survive," said, Butler, who has a disabled wife and two children, ages 15 and 11.
The chief lobbyist for the Mortgage Bankers Association, Steve O'Connor, said new homebuyers would end up paying higher interest and bigger down payments if lenders are saddled with the risk that a judge could change mortgage terms.
"We're going to defend the industry" against "bad public policy," O'Connor said.
The association's 23-member government affairs team is trying to persuade lawmakers to kill the bankruptcy legislation.
The lending industry has voluntary programs in place to change mortgage terms. But Butler's lawyer, Peter Bagley, said it was a nightmare trying to contact his client's lender.
First, he was told the application for a loan modification would take at least 30 days to process. Bagley then called someone with authority to stop any sale of the home, but only received voice messages that the mailbox was full. The application never arrived.
The key to passage of the bankruptcy bill is the Senate, where Democrats need 60 votes to stop a possible filibuster.
Ten Democrats - all still in the Senate - did not back the plan in a vote a year ago.