Housing Bubble
MBA applauds House passage of Bankruptcy Reform Bill
Washington, D.C. - The Mortgage Bankers Association of America (MBA) applauds the passage of the Bankruptcy Abuse Prevention and Consumer Act of 2003 (H.R. 975). The bill passed the House of Representatives by a vote of 315 to 113, one present. MBA urges the Senate to pass H.R. 975 before the spring recess.
“We are pleased that the House has acted on this legislation,” said MBA Chairman, John A. Courson. “The provision that removes the $4 million cap on single asset bankruptcies is very important to MBA’s commercial members. We strongly urge the Senate to pass this legislation that will protect lenders from the potential abuse of the nation’s bankruptcy laws.”
Under the current code, commercial lenders are vulnerable to abuses in single asset real estate (SARE) bankruptcy cases where the asset was valued at more than $4 million. A borrower whose property is in foreclosure can file a Chapter 11 bankruptcy and freeze the foreclosure process without being required either to create a repayment plan or make post-petition payments on the property. This action could potentially expose mortgage lenders to damages and expenses associated with foreclosure delays, thus limiting their ability to make new loans, for an indefinite period of time. Congress’ 1994 reform of the Chapter 11 Bankruptcy Code was designed to reduce this vulnerability. The effects of the earlier amendment were limited, however, because it did not apply to cases where the secured debt was valued at more than $4 million.
Mortgage Bankers Association of America
