AGs urge Congress to amend Bankruptcy Code

By Chris Rizo | Jan 6, 2009

Terry Goddard (D)

PHOENIX, Ariz. (Legal Newsline)-A coalition of 22 state attorneys general asked Congress on Tuesday to loosen U.S. bankruptcy rules so judges can modify home loans to help reduce the tide of home foreclosures.

In a letter to U.S. House and Senate leaders, the attorneys general called for an amendment to the U.S. Bankruptcy Code so federal judges can adjust home mortgages just as they can most other types of debts and loans.

In their letter to Senate leaders, the bipartisan group of attorneys general said they have been on the "front line of efforts to assist homeowners facing unsustainable mortgage loans."

The states' chief legal officers said they have received thousands of complaints from consumers who say they have been victims of predatory lending practices, unscrupulous mortgage brokers and foreclosure rescue schemes.

The amendment to the U.S. Bankruptcy Code would have wide-reaching affects, the letter said.

"The amendment will help neighboring properties by stabilizing prices in the housing market and reducing the negative externalities associated with foreclosures. It will help cities and counties by stabilizing and improving the tax base," the AGs wrote.

They also said the measure would help secondary market investors and other owners by making the stream of income on mortgage-backed securities more certain, and it will help the worldwide financial markets by reducing home foreclosures.

"With the nation's foreclosure crisis growing more severe, this amendment can be a win for both homeowners and mortgage holders," Arizona Attorney General Terry Goddard said. "Bankruptcy judges are well-qualified to work out fair terms that will allow more families to stay in their homes."

Attorneys general from the following states joined Goddard in making the request: California, Connecticut, Delaware, District of Columbia, Illinois, Iowa, Kentucky, Louisiana, Massachusetts, Minnesota,
Mississippi, Montana, New Mexico, North Carolina, Ohio, Oklahoma, Rhode Island, South Dakota, Tennessee, Vermont, Washington and West Virginia.

From Legal Newsline: Reach reporter Chris Rizo at chrisrizo@legalnewsline.com.

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