Mortgage Companies & Banks Lobby Against Amending The Law

It has been said that if you tell a ‘story' often enough over a long enough period of time, sooner or later people will become to believe the ‘story' to be the truth regardless of how outrageous it is.  This is exactly what has happened concerning the proposed changes to the bankruptcy code; to allow bankruptcy judges to deal with home mortgages by restructuring the loans and by reducing the debt to fair market value of the property.
                The most important fact is that the proposed changes are nothing new, but rather putting the law back to what it originally was. Special interest groups made up of mortgage companies and banks lobbied Congress to change the law; preventing bankruptcy judges from dealing with home mortgages in any manner other than to cure an existing arrearage at the time a chapter 13 case is filed.
                The second most important fact is that bankruptcy judges have for many years and continues to deal today with all types of real property and mortgages by restructuring the debt; including changing the interest rate and terms of the loan by "cram down".  A cram down reduces the debt of the property to fair market value, thereby securing the debt.
                The next fact is there is a large body of law that has accumulated over the years instructing bankruptcy judges on how restructuring and/or cram down should be handled.  The Supreme Court of the United States has multiple opinions dealing with this issue.  The result:  bankruptcy judges have vast experience, and a comprehensive set of rules, in dealing with restructuring mortgage debt.
The wailing, moaning, cry of foul plan, including the statement that changing the law would dramatically hurt the mortgage business is bull. The mortgage business has not been hurt in other areas of lending such as: office buildings; apartment houses; second homes and it did not hurt the mortgage business on home loans before congress changed the law under the last administration.
The truth is, the change in the law probably contributed to the present crisis by allowing banks and mortgage companies to make loans they should never have made in the first place. The banks and mortgage companies knew they would not have to answer the hard questions from a bankruptcy judge; the result of which might well be a change in the loan. Simply put, the changes that have occurred put the fox in the hen house and all that is being asked of Congress is to chase the fox out of the hen house.  If congress passes the appropriate changes the effect will be to make mortgage companies and banks accountable for their actions and subject to the same laws that all others are subject to.  Congress is not being asked to make special provisions for homeowners but rather being asked to give homeowners the same laws that all others have access to.