Senator Dick Durbin Has His Own Mortgage Relief Bill: Helping Families Save Their Homes Act

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U.S. Sen. Dick Durbin, D-IL, is backing a bill that will allow homeowners who are in bankruptcy to modify their mortgages and help them avoid foreclosure.

According to a study by the Center for Responsible Lending, Durbin’s bill would help approximately 638,000 families save their homes. This is more than 25 percent of the approximately 2.2 million families at risk of losing their homes because of the subprime mortgage collapse.

The Helping Families Save Their Homes Act would allow these families to file for Chapter 13 bankruptcy. The families will be allowed to work with judges and their lenders to modify their mortgages so they can make affordable payments and keep their homes.

Even after the bankruptcy laws were gutted in favor of banks a few years ago, most personal debt, including vacation homes and family farms, can be restructured in bankruptcy.

Except for mortgages on a primary residence.

This exception dates to the 1970's, when most mortgages were fixed rate, long-term agreements between local bankers and their neighborhood customers.

The bill will also help homes and neighborhoods surrounding foreclosed homes from losing their value.

In Illinois alone, one of the states hardest hit by the subprime market collapse, the fallout from foreclosures is expected to hurt nearly 3 million neighboring homes, at a cost of $17.5 billion. Cook County, Ill., is one of the hardest hit counties in the nation.

Of the 150,000 Cook County homeowners with subprime mortgages, nearly 20 percent are expected to lose their homes to foreclosure. Because foreclosures affect property values of nearby homes as well, nearly 2 million other families throughout the county would see their home values decrease by an average of $7,559. Cook County is home to 5.2 million people.

Durbin’s bill would:

• Eliminate a provision of the bankruptcy law that prohibits modifications to mortgage loans on the debtor’s primary residence, so that primary mortgages are treated the same as vacation homes and family farms.

• Extend the time frame debtors are allowed for repayment so long-term mortgage restructuring can be put in place.

• Waive the bankruptcy counseling requirement for families whose houses are already scheduled for foreclosure sale.

As families go through bankruptcy, the bill would also:

• Combat excessive fees that are sometimes charged to debtors in bankruptcy.

• Maintain debtors’ legal claims against predatory lenders while in bankruptcy.

• Reinforce that bankruptcy judges can rule on core issues rather than deferring to arbitration.

• Enact a higher homestead floor for homeowners over the age of 55, to help older homeowners who are fighting to keep their homes as they go through bankruptcy but live in states with low homestead floors.

• Reinforce that consumer protection claims are still available in bankruptcy.