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.
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