Rep. Barney Frank, D. Mass., chairman of the House Committee on Financial Services, is taking a hard line with the lending industry for failing to take action to prevent more foreclosures. In a statement issued last week, Frank said his committee would not support the industry's legislative agenda until lenders do far more to modify troubled mortgage loans.
In 2008, Congress passed a law designed to encourage, but not require, mortgage lenders to refinance loans in order to prevent foreclosures. Another bill that would have given bankruptcy judges the ability to rework defaulted home mortgages passed in the House of Representatives earlier this year but was stripped from the Senate bill after intense lobbying by the banking industry.
The industry argued that allowing courts to modify loans would force lenders to raise interest rates and discourage them from voluntarily modifying mortgage terms. However, data released today by the Obama administration shows that only 9 percent of eligible homeowners have had their mortgage terms restructured since the program began in February.
'I can assure all concerned that no legislation which we are asked to pass to facilitate the full return of the lending industry to the role it should be playing in the economy will pass out of the Financial Services Committee unless we see a significant increase in mortgage modifications and foreclosure-avoidance, or the legislation includes a bankruptcy provision for primary residences,' said Frank.