The Senate Judiciary Committee has approved a bill that would clarify the authority of the U.S. bankruptcy courts to run mediation programs that facilitate negotiations between struggling homeowners and servicers to prevent foreclosures.
The committee passed the measure on a 10-8 party-line vote. With all eight Republicans voting against it, it is unlikely the bill, sponsored by Sen. Sheldon Whitehouse, D-R.I., will ever reach the floor of the Senate.
Banking and mortgage industry groups oppose the bill (S.222).
Sen. Whitehouse contends current loan modification programs are fraught with problems and mediation is needed to give desperate homeowners a chance to sit down with someone who has the authority to modify their loan.
In his state, Deutsche Bank challenged the legal authority of the bankruptcy court to run a foreclosure mediation program.
"The court ruled in January against Deutsche Bank, but the prospect of future appeals and on-going litigation continue to threaten the program," Sen. Whitehouse said.
During the committee markup, Sen. Tom Coburn, R-Okla., offered an amendment to terminate the Obama administration's Home Affordable Modification Program.
The committee members rejected the Coburn amendment by voice vote. (On Tuesday, the House of Representatives passed a similar bill to terminate the HAMP program.)
Sen. Whitehouse said he has problems with HAMP program, which leaves too many homeowners frustrated and unable to speak with anyone who can help them.
"By bringing together homeowners and mortgage servicers for a face to face negotiation, the Rhode Island bankruptcy court's foreclosure mediation helps streamline that process and has already saved at least 120 homes," the senator said.
