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February 19, 2009

Homeowner Helper: Obama plan would let bankruptcy judges modify mortgages

Obama's proposed anti-foreclosure has a new twist: letting bankruptcy judges reduce mortgages to the present value of the home.

My colleague, TMC Economy blogger Zach Carter explains, "Obama is supporting a bill in Congress that would enable bankruptcy judges to reduce the amount a borrower owes to the present value of the home. The beauty here is that investors who own the mortgage securities, not taxpayers, will have to eat the losses. In short, investors will be held responsible for making a poor investment."

For more information, see Mike Lillis' excellent backgrounder on Obama's housing plan.

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