Washington Attorney General Rob McKenna is joining attorneys general from 21 other states plus the District of Columbia in an effort to convince Congress to loosen bankruptcy rules so judges can modify home loans to help reduce foreclosures.
“Washington state has been a national leader in attacking the wave of predatory lending practices that have been a primary cause of today’s mortgage crisis,” McKenna said in today's news release. “We’re now working to protect families who were swept up by the mess from losing their homes.
“Current bankruptcy laws were developed when home mortgage defaults were relatively isolated,” he continued. “Global economic conditions now play a much larger role in forcing consumers into foreclosure. Changing bankruptcy laws can help reduce foreclosures and generate new loan terms to help both borrowers and lenders.”
The attorneys general say that despite efforts by state and federal government regulators to engage servicers in voluntary loan modifications to avoid unnecessary foreclosures, further action to spur meaningful modifications must be taken. Under the amendment urged by the AGs, losses and benefits would be shared between homeowners and investors.