Citigroup supports measure giving courts big say on mortgage reductions

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Source: LATimes

Reporting from Washington -- For the first time since the housing crisis began, a major mortgage lender agreed Thursday that courts should be allowed to order reductions in the principal of "underwater" loans for some troubled borrowers, cracking what had been fierce and unified industry opposition.

The agreement struck between congressional Democrats and Citigroup Inc. would permit bankruptcy judges to change the terms of mortgages as part of court-ordered debt restructuring. Democrats hope to include the provision in the upcoming economic rescue legislation under negotiation between Congress and the incoming Obama administration.

The suggested change in the nation's bankruptcy laws has been repeatedly proposed -- and defeated -- in recent years.

Under Chapter 13 of the U.S. Bankruptcy Code, judges currently have the right to reduce the principal of auto, credit-card and other loans but cannot reduce the principal on a primary mortgage under any circumstances. As a result, homeowners who go into bankruptcy often wind up with mortgage payments that are even higher than the ones they had before, after skipped payments and other fees are added to the principal...>

Read more: http://www.latimes.com/business/la-fi-mortgage9-2009jan09,0,5908560.story

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1. Why not just reappraise the value of the homes & restructure mortgages based on that?

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2. wow -- now that's interesting. nt