The White House and Current Mortgage Reform Legislation - Part 2
Filed under: HR 3221, HR 5830, Mortgage Industry Legislation — admin @ 11:00 am
As I said yesterday, the Bush Administration has indicated that they understand that HR 3221 will be amended on the Senate floor to include some text from S 2636 and it is the White House’s position to oppose and veto such legislation if passed.
The White House has indicated they will veto legislation with the following provisions:
- From S 2636, provision funding $4b in assistance to state and local governments for the redevelopment of abandoned and foreclosed properties.
o Seen as too exepensive, a bailout to investors and speculators, may cause the market to take longer to recover.
- From S 2636, provision tripling the funding of Neighborhood Reinvestment Coalition NRC
o Seen as unnecessary and taxing the ability of the NRC to administer services.
- From S 2636, provision modifying bankruptcy code to allow judges to modify loan terms
o Seen as undermining existing contracts
o Seen as possibly leading to the contraction of mortgage credit availability and affordability.
In my opinion, the provision to really look at is the modification to the bankruptcy code. Unfortunately, the previous modifications to the bankruptcy code sought to allow consumer credit to have par relevance and priority as mortgage debt. The exception was removed in 2005; but it had been in place since the last major bankruptcy overhaul in 1978. That exception made home loan lenders a favored class of creditors and originally was intended to encourage mortgage lending. Provisions allowing judges to modify terms will not only make them an unfavored class; but have a potentially chilling effect on mortgage investment.