- The Washington Times - Monday, November 24, 2008

The nation’s dilemma over banks trying to collect debt and people trying to avoid losing their homes played out last week before the Senate Judiciary Committee.

Sitting next to each other at the witness table were an Illinois sheriff who has refused to carry out home evictions and a banking executive who cautioned against government bailouts for debtors.

They were witnesses at a hearing to discuss whether to change the nation’s bankruptcy laws to include “cram-down” provisions for homeowners. A bill proposed by Sen. Richard J. Durbin, Illinois Democrat, would give judges discretion to adjust home mortgage rates in bankruptcy.

Currently, judges cannot modify mortgages, leaving few options but foreclosure for many homeowners who get behind in their payments.

If the current trend continues, 6.5 million Americans will lose their homes in the next five years, or one in eight homeowners, according to the Center for Responsible Lending, a public policy foundation.

Sheriff Thomas J. Dart of Cook County, Ill., described the “completely stunned” expression that he often saw on people’s faces when he entered their homes to tell them they were being evicted.

Others would return from work in the evening to find the contents of their home on the sidewalk and their children with no place to sleep that night.

“When I took office, we were evicting 1,771 families from their homes due to foreclosures,” he said. “This year, we are on track to evict 4,500 families.”

Sheriff Dart, who was appointed two years ago, made headlines last month when he announced that he would no longer carry out eviction orders.

He described Chicago’s Englewood neighborhood, where 16 homes once stood on one block. Now it’s down to four homes, two of which are boarded up. The others were demolished after foreclosure.

“There are real families involved,” Sheriff Dart told the Senate Judiciary Committee. “It’s absolute chaos out there.”

His concern over evictions was countered by David G. Kittle, chairman of the Mortgage Bankers Association.

Mr. Durbin’s proposal to help homeowners escape bad debt could make everyone else pay for it, Mr. Kittle said. Lenders would need to raise interest rates and demand higher down payments and more fees from home buyers.

He estimated that the cost of Mr. Durbin’s proposal to make lenders absorb more mortgage debt would be equivalent to a $295 monthly tax on everyone who owns a home.

He also predicted a flood of homeowners filing for bankruptcy to ease their debt burden.

“Some people have to fail,” Mr. Kittle said. “Some businesses have to fail.”

For the same reasons, he said he opposes the federal government’s $700 billion bailout fund for financial institutions.

Mr. Durbin’s bill, the Helping Families Save Their Homes in Bankruptcy Act, failed to win approval by Congress when he introduced it last year, and other senators keep trying to modify it.

But Mr. Durbin hasn’t given up yet.

“I’m going to continue to try,” he said last week.

Political support for the measure is strengthening this year as voters clamor for relief from the nation’s economic woes, he said.

Among the bill’s supporters is Sen. Patrick J. Leahy, Vermont Democrat and Senate Judiciary Committee chairman.

“You cannot simply solve an economic crisis by having an unprecedented number of foreclosures and people out in the street,” Mr. Leahy said.

Above the Law runs on Mondays. Call Tom Ramstack at 202/636-3180 or e-mail [email protected]

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