The U.S. Senate on April 30 voted against allowing bankruptcy judges the power to modify or change predatory mortgages. The legislation could have helped avoid an estimated 800,000 foreclosures. Bankruptcy judges would have had the ability to reduce the interest rates, from as high as 14-16%, to a more reasonable market rate, reduce the principal of the mortgage loan to the value of the house, and also extend the term of the mortgages to 40 years.
This would have helped force mortgage companies to offer their own loan modifications, or face possibly facing a bankruptcy judge who would give the debtors a fair shake. These bankers who brought us into this crisis are literally shunning and stiff-arming the people who are facing foreclosure, said Senator Richard Durbin of Illinois, who was the sponsor of the legislation and the Senate "whip" or the second ranking Democrat.
It's unbelievable to me that the same banks and financial institutions that got us into this current economic mess, that invented and originated these so-called "toxic" loans, still have such political power that they can crush a pro-consumer bill like this. I guess it's just another example of the "Golden Rule" at work: "them that has the gold, make the rules."