Sen. Evan Bayh (D-Ind.) stated that currently there is not enough support to prevent a filibuster, or “talking out a bill”, of the proposed legislation, which would allow mortgages to be restructured through a Chapter 13 filing. Currently, the legislation proposes to: 1) modify the principal of a mortgage to the fair market value of the property; 2) adjust the interest rate of the mortgage; and 3) extend the terms of the mortgage loan out to 40 years.
Senate Majority Leader Harry Reid is working with Judiciary ranking member Arlen Specter to narrow the eligibility for borrowers who could take advantage of the “cramdown” provisions. The debate in Congress currently revolves around whether an eligible homeowner offered a “qualified” loan could still take advantage of a “cramdown” if they did not take the offer for a “qualified” loan workout. The legislation, which passed the House, did not mandate that the borrower had to take such an offer if eligible, in lieu of a “cramdown”. Senate moderates are pushing for a mandatory requirement that borrowers try to modify their mortgage with lenders before seeking help in bankruptcy court or they will not be eligible for “cramdown”.
To overcome a filibuster, the Senate must have 60 votes to invoke cloture and end debate on the Bill or it will be defeated. For now, debate on the Bill will be put on hold until after the Senate’s April recess ends on April 19th, 2009.
If you have any questions on this information, please contact David H. Yunghans, Esq., an associate focused on bankruptcy located in the Cincinnati office of Weltman, Weinberg & Reis Co., L.P.A. David can be reached at (513) 723-2211 or via e-mail at dyunghans@weltman.com.
For more information on bankruptcy legislation, visit our bankruptcy blog at WWRbankruptcy.com. In addition to discussions and updates on the upcoming legislation, we highlight changes we see in court procedures as well as different features in the proposed legislation that may directly affect you and your company. We comment on the possible interpretations the courts may give to the statutes as well as how they could affect your business and what options may exist to deal with them. We invite you to partner with WWR in this blog by reading and sharing with us your questions, concerns, and observations in each article’s comment section or on our Contact page. WWR is committed to helping you navigate through these challenging times.
Client Advisory is published by Weltman, Weinberg & Reis Co., L.P.A., an organization providing comprehensive creditor representation. The information contained in this advisory is a summary of legal information and is not intended to constitute legal advice on specific matters or create an attorney-client relationship. Contact any of our offices or visit our website at www.weltman.com for more bankruptcy related information or www.realestatedefaultgroup.com for more real estate related information, company facts and attorney profiles.