The Mortgage Modification Bill that was passed last week by the House of Representatives has now stalled in the Senate. One key provision of the bill is to allow bankruptcy judges to modify mortgages. Judges could reduce the principal of the mortgage as well as reduce the interest rate and extend the terms. Advocates of the bill claim these modifications, referred to as "cramdowns", would greatly reduce the number of foreclosures. Financial institutions, particularly credit unions that did not offer subprime mortgages, oppose the legislation.
Individuals who are delinquent or upside down on their mortgages need to closely monitor this legislation. There is no updated timeline on its consideration by the Senate, but for now the vote is off.
