Thus far, congressional efforts to stem the foreclosure crisis have come up short. 8.1 million homes face foreclosure in the next five years, while nearly 8 in 10 seriously delinquent homeowners are “not on track” for foreclosure mitigation. Foreclosures affect both homeowners who lose their homes and entire communities that suffer from falling home prices and declining property tax revenues. Further, addressing the housing crisis is a fundamental step in addressing the financial crisis. The Helping Families Save Their Homes in Bankruptcy Act authorizes federal bankruptcy courts to modify the terms of certain mortgages. Bankruptcy law currently bars modifications on primary residences, while allowing modifications for vacation homes, family farms, and yachts. The bill would permit bankruptcy courts to restructure the debt on home mortgages by lowering interest rates, changing adjustable rates to fixed rates, and extending repayment periods. Additionally, the legislation protects homeowners from liability for fees incurred while a bankruptcy is being processed, strengthens remedies against predatory lenders while in bankruptcy, and permits bankruptcy courts to wave penalties on homeowners who pay their mortgages in full ahead of schedule.

The House passed similar legislation (H.R.1106) that is awaiting Senate action. S.61 is the Senate version.