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Lisa Napoli: To rescue or not to rescue? That’s one of the debates on Capitol Hill this week. The Senate could vote on a bill that would let bankruptcy judges reset the terms of mortgages to keep stave off foreclosing. Democratic sponsors say this would save 600,000 homeowners.
Marketplace’s D.C. Bureau Chief John Dimsdale says the banking industry is lobbying hard against the bill.
Ed Yingling: This is exactly the wrong answer to the mortgage crisis.
John Dimsdale: That’s Ed Yingling, the president of the American Bankers Association. He says allowing bankruptcy judges to reduce mortgage payments for struggling homeowners means the courts will be cutting the value of the home they’re living in.
Yingling: That means anybody — anybody — who owns a home is seeing the value of their home as collateral for a loan go down.
But supporters, like Eric Stein with the Center for Responsible Lending, say court-imposed property values will still be better than the alternative, which is homeowners walking away from their loans.
Eric Stein: If a lender has to sell a house in foreclosure, they sell it at auction. For what’s called liquidation value where they get much less than that. So everybody’s property values fall. So it hurts the lenders, it hurts the neighbors, it hurts the municipality, it hurts the country.
But the White House says the bill will do more harm by driving up risk to banks, and therefore mortgage prices for everyone.
In Washington, I’m John Dimsdale for Marketplace.
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