Los Angeles Times (04/22/08); Hiltzik, Michael A.
Observers say proposed legislation that would allow judges to modify primary mortgages for borrowers facing Chapter 13 bankruptcy likely will not be passed due to strong opposition from the lender community. A report from the Mortgage Bankers Association indicates that home-loan rates would rise up to 2 percentage points if the measure were passed, as lenders would be concerned about loan reliability. However, Georgetown Law School's Adam Levitin and Columbia University's Joshua Goodman examined rates from several mortgage lenders and saw no difference between those imposed on single-family homes and those for vacation and multifamily properties whose mortgage terms can be modified during bankruptcy proceedings. Levitin and Goodman noted differences between single-family mortgage rates and rates imposed on investment properties, mainly due to the risk that investors will abandon properties if they owe more than the homes are worth. While supporters of the bankruptcy legislation believe it would make loan servicers more open to modifications, concerns about the impact of the legislation on mortgage costs likely will determine what action lawmakers take.
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