A few years ago, many seeking to buy a home were able to take advantage of special loans which now have inflated mortgage payments. Many of those homeowners can no longer afford the monthly payment and they are losing their houses due to floreclosures. In Washington D.C. there was a plan put before congress that would give people threatened with losing their homes more leverage in winning favorable loan terms from their lenders in bankruptcy courts. The senate failed to pass the bankruptcy plan by a vote of 58-36 vote which was created to help the down housing market.
The Democratic-backed bankruptcy law changes, opposed by banks and GOP allies and some Democrats would have given judges the power to cut interest rates and principal on troubled mortgages to help desperate borrowers trapped in subprime mortgages keep their homes. The idea was to give borrowers that took advantage of the easy loans help and to give them new plans. But Republicans and 10 Democrats, along with Connecticut independent Joe Lieberman, voted to scuttle the bankruptcy provision. Opponents argued the proposal would hurt more than it would have helped by leading mortgage lenders to ratchet up interest rates and thereby put another drag on the soft housing market.
The defeat of the bankruptcy plan highlighted a weakness that many people find with the bill that it showers generous tax breaks on money losing businesses like home builders but does little to help people facing foreclosure.
The measure is advertised as helping people keep their homes and injecting demand into the housing market. But its most costly provision simply gives tax cuts worth $25 billion over the next few years to businesses like home builders and banks. Meanwhile, it provides just $3 billion in tax relief to homeowners over the same period, according to an estimate by the Joint Tax Committee, which explores for lawmakers the effects of tax legislation on the Treasury.
