Cohen/McDermott Introduce Bill to Prevent Foreclosures, Help Struggling Families Keep Their Homes

WASHINGTON, D.C. – Saturday, Congressmen Steve Cohen (D-TN-9) and Jim McDermott (D-WA-7) introduced The Limiting Investor and Homeowner Loss in Foreclosure Act of 2011, legislation that would help struggling families keep their homes. The legislation would clarify the authority of bankruptcy courts to operate mortgage modification programs.

“Memphis has been hit hard by foreclosures,” said Congressman Cohen. “Foreclosures evaporate middle class wealth. Our bill would help families keep their homes and avoid the stress and difficulties of foreclosure by giving them and their lenders the chance to sit down with each other so they can modify their loans.”

"The continuing, and often unnecessary, rush to foreclosure in the U.S. housing market continues to threaten millions of American families and drag down the economy,” said Congressman McDermott. “The administration said more needs to be done and I couldn’t agree more. This bill will ensure that homeowners have the chance to sit down with their lenders and discuss options to stay out of foreclosure.”

The Cohen/McDermott measure was crafted to encourage debtors and secured lenders to come together to discuss mutually beneficial resolutions of their mortgage difficulties and to facilitate resolution by opening the lines of communication. Current bankruptcy courts with a mediation and loss mitigation program in place have been quite successful, which is proof positive bankruptcy courts can play an important role in helping facilitate successful voluntary loan modifications. But several banks have challenged the legal authority of the bankruptcy courts to carry out such programs. The Cohen/McDermott legislation would clarify that bankruptcy courts already have the authority to operate voluntary mortgage modification programs.

Congressman Cohen has also authored legislation -- the Preventing Homeowners from Foreclosure Act of 2011 – that would create a grant program to help local communities establish foreclosure mediation programs. Foreclosure mediation would postpone Sheriff sales of all owner-occupied residences until the homeowner has had an opportunity to meet with a housing counselor to explore viable alternatives to foreclosure. It will give troubled homeowners and lenders an opportunity to meet face-to-face before any foreclosure goes forward.

The program would also establish an outreach program to raise homeowner awareness of the mediation program. Any state or local government that receives help from this grant program would be required to keep a record of each mediation carried out, including the nature of any loan modification.