Obama Announces Plan to Address the Foreclosure Crisis and Pledges to Reform Bankruptcy Laws

Yesterday, President Obama pledged to reform bankruptcy laws so that judges are allowed to rework home mortgages on family homes to an affordable value. Currently, bankruptcy judges are permitted to modify mortgages on second homes, but not mortgages on primary residences.

This reform will give bankruptcy judges the authority to modify mortgages, providing struggling families the opportunity to save their home from foreclosure. “That’s the rule for investors who own two, three, and four homes. So it should be the rule for folks who just own one home,” said Obama, during his speech yesterday announcing the plan.

In addition, The Homeowner Affordability and Stability Plan focuses on helping homeowners refinance their mortgages to be more affordable. The plan will provide $75 billion to help stabilize mortgages for three to four million homeowners at risk of foreclosure. This broad and comprehensive plan also aims to lower mortgage rates by rebuilding public confidence in Fannie Mae and Freddie Mac.