Key Senator Takes Aim at MBA in Bankruptcy Debate

Sen. Dick Durbin, D-Ill., slammed the Mortgage Bankers Association for continuing to oppose his bankruptcy bill and for grossly underestimating the foreclosure problem. At a press conference, the second ranking Democrat in the Senate noted that MBA chairman David Kittle recently testified at a committee hearing that allowing bankruptcy judges to modify mortgages would result in a $295 tax per month on every homeowner. The Senate Judiciary Committee member said he challenged that tax number and MBA has provided no evidence to support it. "It is just a number thrown at the committee by the mortgage bankers who I don't believe enjoy the greatest credibility," Sen. Durbin said. "We are in the process of responding to the committee's questions," said MBA spokesman John Mechem. But allowing bankruptcy cramdowns will increase the mortgage rates by 150 to 200 basis points, he said. "We stand behind that estimate." Allowing judicial modifications would give servicers an "incentive to modify mortgages," Sen. Durbin said at the press conference, and it would give struggling homeowners "some leverage" in negotiating with servicers.