WASHINGTON - Barney Frank, chairman of the House Committee on Financial Services, threatened to revive the mortgage “cram-down’’ bill that stalled in Congress this year, saying lenders are not being aggressive enough in modifying troubled home loans.
Cram-downs let federal judges lengthen terms, cut interest rates, and reduce mortgage balances of bankrupt homeowners, even if the lender objects. Congress gave the mortgage industry every legislative tool it requested to allow them to more easily modify loans for those facing foreclosure, and the results have been below expectations, Frank said in a statement yesterday.
“People in the servicing industry and in the broader financial industry must understand that if this last effort to produce significant modifications fails, the argument for reviving the bankruptcy option will be extremely strong, and I think there is a substantial chance that the outcome will be different,’’ Frank, a Massachusetts Democrat, said.
Foreclosures and delinquencies have continued to rise since President Obama began rolling out relief programs in February. Senate Banking Committee chairman Chris Dodd, a Connecticut Democrat, assailed the sluggish results at a hearing this month, while industry executives blamed confusion and delay over how the government sets rules for the programs.
“Congress is very irritated with the banks, they don’t think they’re moving fast enough,’’ said Paul Miller, a bank analyst at FBR Capital Markets in Arlington, Va.
Frank managed to get a cram-down bill through the House of Representatives in March, only to see the legislation stall in the Senate as lawmakers there bickered over whether to limit the provisions to certain loans or a specific timeframe.
“Barney Frank can threaten to bring back the cram-down bill all he wants, he will never get it past the Senate in its most recent form,’’ said Josh Rosner, an analyst with Graham Fisher & Co. in New York.