Bankruptcy Reform Inclusion Considered for Economic Stimulus
admin on January 12th, 2009
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In a recent caucus by Congressional Democrats to discuss an economic stimulus plan, a former Labor Secretary said that homeowners should be able to write down the value of their primary residence in bankruptcy court. Currently, only leased investment properties may be devalued by the bankruptcy courts and re-amortized to meet the market’s current conditions and the borrower’s ability to pay.
The nation’s homeowners have seen their property values drop as much as 40% since the start of the economic decline nearly 2 years ago. Over a million homeowners lost their homes in 2007, while bankruptcy courts adjusted the mortgages, to an affordable level, on investment properties for real estate investors. Banks are steadfastly against such a measure in bankruptcy courts, but may agree if the measure includes financial assistance from the remaining $350 billion TARP bailout fund.
Last month, Chairman of the House Financial Services Committee, US Representative Barney Frank (D-MA), threatened to hold up allocation of any additional TARP funds if at least a portion of the funds were not used to aid defaulting homeowners
