Las Vegas real estate, mortgage, appraisal blog

Forbes.com reported that although there is a bill put that will be put before the Senate next week which would allow judges to alter mortgages to stop foreclosure, not many are on board with the idea. Lenders say it would lead to a hike in the cost of mortgages for all borrowers in order to insure loans against the chance of only part of the loan being paid back. The Bush administration has already said that such a law will be vetoed and even the head of the Fed, Ben Bernanke, says that it will be more of a cost to the economy than a benefit.

Indiana Senator Evan Bayh, a Democrat, argued for the proposal saying that only existing mortgages would be subject to the bill. Bernanke fears if the legislation is passed Congress might broaden the bill's influence, which would likely increase mortgage costs even more. The possibility of increased mortgage costs caused the Fed's chief to say he would "decline to endorse" the bill.

Kurt Eggert, a law professor at Chapman University, in Orange, Calif., has testified before Congress about mortgage default issues and is a past member of the Federal Reserve Board's Consumer Advisory Council. Eggert says that judges inability to modify home loans is the "significant exception" to a general rule that judges can alter debt terms. He questions whether it is prudent for judges to not have this right.

Arguing the other side is Alan Pomerantz, a partner at the Orrick Law firm, in New York, who specializes in real estate and financial law. He told Forbes.com that the proposed bill "would probably be unconstitutional, the Constitution protects private contracts." Pomerantz said that the federal legislature doesn't have the authority to change agreements, "unless the contract is illegal or somehow against public policy. "

This will most likely not be the last we hear of similar bills attempting to pass in the Senate. This does bring up an interesting question though. "Who wants to loan money that might not be paid back?"