Amendment to Helping Families Save Their Homes Act of 2009

This amendment would have allowed bankruptcy judges to modify troubled mortgages to aid homeowners in foreclosure.[1] Under current personal bankruptcy law, judges can alter loan terms on secondary properties like vacation homes, investment properties, farms and commercial buildings, but not on primary residences.[2] This amendment would have empowered bankruptcy judges to alter loans on primary residences,[3] allowing judges to force lenders to lower interest rates and reduce the principal owed on home loans.[4]

• Bankruptcy reform especially benefitted homeowners who owe more on their mortgages than their homes are worth.[5]
• Because loan modifications through bankruptcy reduce principal, borrowers would subsequently build up equity. A typical bank loan modification reduces monthly payments, but not principal, leaving these borrowers without equity to fall back on and at risk of re-defaulting on their loans.[6]

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