Frank Threatens Banks With a Return to ‘Cramdown’
As voluntary mortgage modifications have failed to keep pace with foreclosures, House Financial Services Committee Chairman Barney Frank (D-Mass.) said Wednesday that it might be time to bring back the stick of bankruptcy reform. That proposal, which would empower homeowners to escape foreclosure through bankruptcy, was passed in the House in March, but didn’t survive the Senate vote in April.
White House officials met with mortgage servicers Tuesday to pressure them to do more to modify loans voluntarily, but Frank is skeptical.
“Congress has provided every legislative tool recommended by people in the mortgage industry, and in the administration, that we were told would be helpful in facilitating the modifications we need to diminish the flood of foreclosures which has been so much a part of our national economic problem,” Frank said in a statement, which continued:
[P]eople in the servicing industry and in the broader financial industry must understand that if this last effort to produce significant modifications fails, the argument for reviving the bankruptcy option will be extremely strong, and I think there is a substantial chance that the outcome will be different.
The different outcome Frank envisions, of course, would have to take place in the Senate, where he noticeably isn’t. Still, another House push could put additional pressure on the 12 Senate Democrats who voted against the bill the first time around, particularly if the number of foreclosures continues its steady rise.