WASHINGTON — As the U.S. recession deepens, two members of Congress pledged Tuesday to make the rising rate of foreclosures their top priority in January.
Sen. Richard Durbin, D-Ill., and Rep. Brad Miller, D-N.C., said they'll renew their push to allow bankruptcy judges to alter the financial terms of unsavory mortgages.
Digital Access For Only $0.99
For the most comprehensive local coverage, subscribe today.
"Millions of middle-class families are now underwater," Miller said at a Capitol news conference. "When they lose their homes to foreclosure, they lose their place in the middle class, probably forever."
A year ago, 2 million homeowners faced foreclosure.
A new report this week from Credit Suisse said that 8 million U.S. homeowners could face foreclosure during the next four years, representing 16 percent of all mortgages.
Meanwhile Tuesday, the National Association of Realtors' index of pending U.S. home sales beat expectations in October — but deeply discounted foreclosures and distressed sales accounted for nearly half the deals.
"The foreclosure problem continues to get worse," Miller said.
The lawmakers introduced legislation a year ago that would allow bankruptcy judges to modify mortgage terms for families facing the loss of their homes.
Durbin and Miller's legislation was fought aggressively by the mortgage banking industry, and lenders will fight it again next year, said John Mechem, spokesman for the Mortgage Bankers Association of America in Washington.
He said allowing bankruptcy judges to "cram down" the value of a house, as the procedure is known, increases risk for lenders. They, in turn, would pass the costs to other home buyers in higher fees or lending rates.
"It's going to raise costs against consumers," Mechem said. "Lenders would price that risk into all new loans moving forward."
Durbin and Miller tried to get their ideas incorporated into the economic stimulus package passed by Congress this fall, but opposition from the White House and some Republicans kept the program out of the bill.
The stimulus bill passed without the bankruptcy provision, but at the same time, many liberal Democrats said they wanted more done to help homeowners struggling with foreclosure.
Miller and Durbin will try again to get their bill into a stimulus package being considered for January.