Washington, DC – The Senate Judiciary Committee today voted to approve legislation by U.S. Senator Sheldon Whitehouse (D-RI) aimed at helping struggling families keep their homes. By a vote of 10 to 8, the committee approved the Limiting Investor and Homeowner Loss in Foreclosure Act (S. 222), which would clarify the authority of bankruptcy courts to run mortgage modification programs.
“Too many families in Rhode Island and throughout the country have been hurt by a broken foreclosure system fraught with long waits on the phone, lost paperwork, and an inability to speak with someone who’ll give their last name or make a decision,” said Whitehouse. “By bringing together homeowners and mortgage servicers for a face to face negotiation, the Rhode Island bankruptcy court’s foreclosure mediation program helps streamline that process and has already saved at least 120 homes.”
Starting in 2009, the Bankruptcy Courts for the Districts of Rhode Island and New York began offering pre-trial foreclosure mediations. While no settlement is required, the program brings together the homeowner and their mortgage company for a good faith negotiation. Unfortunately, Deutsche Bank last year challenged the legal authority of the Rhode Island Bankruptcy Court to run their mediation program.
The Court ruled in January against Deutsche Bank, but the prospect of future appeals and ongoing litigation continue to threaten the program. By clarifying the law to specifically authorize bankruptcy court mortgage mediations, Whitehouse’s bill would put an end to these legal challenges and encourage other districts around the country to adopt similar programs.
“This program will not prevent all foreclosures, but it can at least ensure that the big banks and mortgage servicers, whose practices contributed so much to the nationwide housing crisis, are giving families a fair chance to stay in their homes,” Whitehouse said.