Mortgage Industry Balks at Loan Modification Plan

Posted on January 9, 2009. Filed under: bankruptcy, Foreclosure Defense, Legislation, Loan Modification, Mortgage Law | Tags: , , , , , , , , , |

If you want a sign the financial world is changing fast, look no farther than Thursday’s announcement that Citigroup would back legislation allowing judges to modify mortgage terms in bankruptcy.

The bill, championed for more than a year by Sen. Richard Durbin (D-Ill.) — and backed by many Democrats, including President-elect Barack Obama and Sen. Chuck Schumer (D-NY) — has been anathema to the financial-services industry for just as long. The industry successfully fought it off several times over the last 18 months, most recently in this fall’s negotiation over the Emergency Economic Stabilization Act. And as recently as December, industry officials were promising an ugly fight, and saying they might still be able to head off the measure entirely.

No longer. Citigroup’s announcement on the new loan modification plan comes even as the same officials acknowledge that a compromise is likely — though perhaps not this compromise. “I think the politics, the substance, the economics, the tax angle all work against the industry on this one,” a financial-services industry official said in an interview Wednesday night, before the Citigroup’s loan modification agreement was public.

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