Friday, March 6, 2009

Chapter 13 Mortgage Cramdown Bill Passes House of Representatives, Moves to Senate For New Battle About Amendments

By Andrew Toth-Fejel, Bankruptcy Litigation Support for Attorneys,

Yesterday evening (March 5) the House passed H.R. 1106, the Helping Families Save Their Homes Act of 2009, by a largely party-line vote of 234 to 191. Seven Republicans voted for it, 24 Democrats against. None of the Oregon and Washington Representatives broke party ranks. The vote came a week after debate on the bill began on the floor a week before, and after votes on three substantive amendments, two of which passed and one failed, all again mostly decided on party-line votes. The issue now goes to the Senate, as early as next week according to a spokesman for Senate Majority Leader Harry Reid, as reported by

Senate Prospects

The Senate's bill, S. 61, is identical to the House's original bill, H.R. 200, when both were introduced on January 6, 2009, but has not yet seen any committee action. The consensus appears to be that passage in the Senate of a bankruptcy mortgage modification bill will be more difficult than in the House, if for no other reason than the Senate's rule requiring 60 votes to force a vote, effectively meaning that the bill must have the support of every Democratic Senator and also a couple Republicans. The additional time also gives the lobbying power of the mortgage industry opportunity to further limit the amendment's scope and to continue to try to kill it. However, the continuing downward spiral both in foreclosures and in the general economy may well encourage Senate passage. Of the House Republicans who crossed party lines to vote for H.R. 1106, most were from states with the worst foreclosure situations.

Amendments Made on the House Floor

Of the three amendments debated on the House floor yesterday, the one that was the closest vote, 211-218 (with all Republicans and 37 Democrats voting for in favor) did not pass. It sought to provide that if a residence with a mortgage modified through Chapter 13 is sold after "the effective date of the [Chapter 13 plan," at a net profit beyond the modified principal amount, the mortgage holder would recapture ALL of this profit (instead a portion as provided by another amendment).

The significant substantive amendment which did pass by 263-164, with all Democrats and 10 Republican votes, requires courts to use FHA appraisal guidelines in cases of dispute about a residence's fair market value, prevents Chapter 13 modifications for homeowners deemed to be able to pay their mortgage, extends the negotiation period before filing from 15 to 30 days, and requires the debtor to certify that he or she contacted the lender and provided it with income, expense and debt statements.

The other substantive amendment which passed, near unanimously, 423-2, provides that for debtors with their residence in foreclosure, their pre-filing credit counseling requirement can be met not just before filing but up to 30 days thereafter.

The precise language of these amendments is found in House Report 111-21
and 111-23. In an upcoming Bulletin on this website I will provide a more detailed analysis of the entire bill in its final version.

Party Unity

In the final 234-191 vote on the bill, the seven Republicans voting in favor are from Florida, Ohio, Delaware, New York and North Carolina, and the 24 Democrats voting against are from the South and Border States, and the greater Midwest.

Interestingly, the Republicans tended to vote more as a block with the exception of the key 1st amendment and the final vote. The opposition seems to be somewhat more united than the proponents. We shall see if that carries through to the Senate.

A new Bulletin on this website will provide an update of this legislation as soon as there is new information to report, certainly by the end of next week (March 13). PLEASE EMAIL ME at the address below IF YOU WOULD LIKE TO BE EMAILED A LINK TO IT AS SOON AS IT IS UPLOADED.

by Andrew Toth-Fejel
Bankruptcy Litigation Support for Attorneys
PLEASE NOTE that this Bulletin and the entire contents of this website are NOT designed for the general public but rather only for attorneys. The writer is not licensed to practice law in any state. This means that he is not legally permitted to give any legal advice or perform any legal services. Any non-attorney reading this must consult an attorney about ANYTHING contained here. Nothing in this website is intended to be nor should be read as being legal advice to anyone.

© 2009 Bankruptcy Litigation Support for Attorneys