Progress Illinois

The foreclosure crisis is not going away. New data from RealtyTrac shows that the number of Illinois households threatened with losing their homes rose 62 percent percent in February from last year’s levels—more than twice the national average. A whopping 14,000 Illinois homeowners received at least one foreclosure-related notice last month. And the market isn’t yet recovering. “It doesn’t bode well” for the embattled U.S. housing market, said Rick Sharga, vice-president for marketing at RealtyTrac, a foreclosure listing firm. “At least for the foreseeable future, it’s going to continue to be pretty ugly.”

What could help? Sen. Dick Durbin’s mortgage bankruptcy reform legislation, which would allow bankruptcy judges to change payment schedules, lower interest rates, and reduce the principal owed to the current fair market value of a homeowner’s primary residence, something they can already do on second properties and family farms.

But what’s the bill’s status?

After some last-minute, symbolic changes ensuring that bankruptcy is the homeowners’ last option (thanks to Melissa Bean and other moderate Democrats), a version of the measure passed the House along party lines. Now, it awaits a vote in the Senate, which may not come for a while. The Washington Post has more:

The provision passed the House last week but has not been scheduled for a Senate vote. The Senate had been expected to take up the bill as soon as this week, but it now could be delayed a few weeks, perhaps until after Easter, some congressional aides said.

The hold-up is over the scope of the bill. The financial services industry has been lobbying hard to limit the reform to just subprime mortgages, a move housing advocates call wrong-headed. “Limiting it to sub-prime doesn’t make any sense [now],” Sharon Price, policy director at the National Housing Conference, told the Washington Independent. “A year ago — maybe. But at this point, most sub-prime loans are running their course, so it wouldn’t help many homeowners.”

Republicans opposed to the bill also want to block a bankruptcy judge’s ability to modify a mortgage if the borrower’s lender had offered to change the mortgage terms to make it more affordable. But this point doesn’t make any sense: Why would a homeowner subject herself to bankruptcy proceedings if she could just walk up to their lender and change the terms of her existing mortgage?

The ensuing fight looks like it will get nasty. Remember, the proposal has already been shoved aside by the Senate three times. We’ll keep you on posted any further details.