House Rejects Law Allowing Judges to Restructure Mortgages
The House of Representatives passed legislation overhauling the financial system. Unfortunately, the house did not include language allowing judges to restructure mortgages.
The national financial system is an utter mess. I don’t have to tell you that. Just watching the news the last three years has been proof. From financial institutions that are “to big to fail” to massive bonuses to executives in companies that are failing, things are just a mess. To cure this mess, the House passed The Wall Street Reform and Consumer Protection Act. It provides a host of protections, but one big one is missing.
The House had the opportunity to include a Mortgage Crackdown provision in the bill. What is this? Well, it is a provision that allows bankruptcy judges to come in and modify the terms of a mortgage as part of a bankruptcy provision. This is an area that has been generally viewed as without merit, but some judges have done it anyway.
Bankruptcy law is primarily a federal law. This means that Congress sets down the specifics of the law. A judge might find the law unconstitutional and outlaw part or all of it, but he or she cannot amend a law to allow the judge to take certain actions. This is why it was vital that the House and Congress in general include provisions in the law allowing bankruptcy judges to amend mortgages.
The more things change, the more they stay the same. The supposed regulatory revolution that would protect us from another Great Recession is fizzling. One need look no further than the statement by the Mortgage Bankers Association who “thanked” the House for having the courage not to allow bankruptcy judges to set aside brutal mortgages.