New legislation could provide unemployed with cash for mortgage payments

The Obama Administration’s loan modification program isn’t addressing
the root of the foreclosure crisis, Laurie Goodman, senior managing
director at Amherst Securities Group, said in testimony to the House

Financial Services Committee today. She said the program is “destined
to fail” unless policymakers begin to address negative home equity by
requiring lenders to reduce the outstanding principal on underwater
borrowers’ home loans. Negative equity has become “a key predictor of
loan modification re-default, more so than unemployment or other
[factors],” Julia Gordon, senior policy council at the Center for

Responsible Lending, testified. House Financial Services Committee
chairman Barney Frank, said he recognizes the government’s failure to
halt the foreclosure crisis and will introduce legislation this week
that would provide unemployed homeowners with money to make mortgage
payments through a new federal program. The legislation will also
include a mortgage “cram-down” component that would allow federal
judges in bankruptcy court to overrule lenders by lengthening
homeowners’ mortgage terms, cutting their interest rates and reducing
their loan balances, Frank said. [Bloomberg]