The same banks bailed out with taxpayer money are now lobbying Senators to undercut pending pro-homeowner measures. The most contentious point to the lending industry is loan cram-downs, whereby a bankruptcy judge can reduce the principal amount due on a loan and, in effect, force lenders to act on their own to keep owners in their homes by eliminating negative equity in mortgaged properties. Democratic lawmakers and President Obama perceive the measures as a viable method for stopping foreclosures, preventing even greater dumping of REO properties at ever lower prices which creates more negative equity situations and perpetuates the cycle, all of which is adverse to keeping troubled homeowners in their homes. However, to get the measure approved in the Senate, Democrats may need to attach the measure to another banking bill that favors the lending industry, or detach it and vote on it independently. Though the minority party, Republican lawmakers still have some clout.

first tuesday take: Cram-down legislation is the single most important loan modification factor that will help keep negative-equity homeowners in their homes. However, actions by lobbying lenders, the same mob who created the current devaluation disaster and then received the taxpayer bailout, is indicative of the sad fact that substantive thinking has trouble germinating in Washington D.C.

The lending industry trade union with its cover of darkness claims cram-down legislation will increase rates for everyone, including well-qualified buyers, though history concludes differently – interest rates are lower now than they were before October 2005 when the lender-lobbied congress stripped bankruptcy judges of their cram-down authority, authority which had served the public well and left mortgage money interest rates unaffected since its inception. If you follow this bogus line of lender rationale that interest rates on mortgages will increase if judges have the right to correct an economic distortion, then California’s anti-deficiency laws protecting property owners from liability for their mortgage debt will be the next logical deregulation demanded by lenders.

Re: “Banks Sway Bills to Aid Consumers,” from the New York Times