The Real Deal Miami

Lenders worry foreclosure plan will have ripple effect

February 19, 2009 11:37AM

Under the foreclosure-prevention plan announced by President Barack Obama yesterday, bankruptcy judges have the power to cut loan payments steeply if the mortgage industry does not modify a loan. Bankruptcy judges previously had the power to wipe out other kinds of consumer debt, but not mortgage debt on primary residences. Lenders have expressed worry that if judges cut loan payments, losses for lenders and investors will increase. The U.S. Chamber of Commerce said the legislation will add to the uncertainty in the housing market, raising interest rates.