[Congressional Record Volume 153, Number 149 (Wednesday, October 3, 2007)]
[Senate]
[Pages S12533-S12538]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




          STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

      By Mr. SPECTER:
  S. 2133. A bill to authorize bankruptcy courts to take certain 
actions with respect to mortgage loans in bankruptcy, and for other 
purposes; to the Committee on the Judiciary.

[[Page S12534]]

  Mr. SPECTER. Mr. President, I seek recognition to introduce the 
Homeowners' Mortgage and Equity Savings Act of 2007. In recent years, 
low interest rates and easily available credit have significantly 
increased home ownership in this country. The U.S. home ownership rate 
increased from 64 percent in 1994 to over 69 percent in 2004. The 
increase has been particularly dramatic among minority groups. During 
that same period, the home ownership rate among Hispanics and Latinos 
rose by around 20 percent, to nearly 50 percent. For African Americans, 
the rate rose by 14 percent, also nearing 50 percent.
  However, with interest rates at all-time lows, lenders increasingly 
offered mortgages to those who previously either would not have 
qualified for a mortgage or could not have afforded the payments on a 
mortgage. To do this, lenders offered new types of mortgages designed 
to keep monthly payments low, at least in the short term. In 
particular, lenders issued large numbers of adjustable rate mortgages, 
``ARMS'', loans that often feature low introductory interest rates that 
later adjust to significantly higher rates. Lenders also issued no-
down-payment or interest-only mortgages, which also often featured low 
introductory interest rates that later increase significantly.
  With the era of easy money and low interest rates over, a crisis 
looms. Many borrowers with adjustable rate, interest-only or no-down-
payment mortgages have been unable to keep up with their monthly 
mortgage payments that have reset to higher rates. In many cases, 
resetting interest rates means monthly payments increase by $250 to 
$300 on a typical $1,200 monthly mortgage. Moreover, many ARMS featured 
early repayment penalties, making it difficult for homeowners to fix 
the situation by refinancing and obtaining less risky mortgages.
  As a result of resetting interest rates, delinquencies and 
foreclosures involving ARMs have risen dramatically. Delinquencies and 
foreclosures have been particularly high among borrowers with weak 
credit who were issued loans at subprime rates. According to the 
Mortgage Bankers Association, between the second quarter of 2006 and 
the second quarter of this year, the percentage of homeowners with 
subprime ARMs who are seriously delinquent, those who are either more 
than 90 days past due or in foreclosure, has nearly doubled, from 6.52 
to 12.40 percent. The number rose by over 20 percent during the second 
quarter of this year alone. The Center for Responsible Lending projects 
that 2.2 million Americans with subprime loans originated between 1998 
and 2006 have lost or will lose their home to foreclosure.

  While the situation has been most severe for homeowners with subprime 
loans, the problem now is spreading to those with prime rate loans. In 
the past year, the percentage of homeowners with prime rate ARMs that 
were seriously delinquent on their mortgage payments more than doubled 
from 0.92 to 2.02 percent. According to the Mortgage Bankers 
Association, in the second quarter of this year, the number of 
homeowners who got foreclosure notices reached an all time high of 0.65 
percent, largely because of increases among homeowners with ARMs, 
delinquencies and foreclosures for fixed rates mortgages have increased 
only moderately. The situation will only get worse in coming months as 
an estimated 2 million homeowners with adjustable rate mortgages see 
their interest rates reset to much higher rates. According to some 
sources, a quarter of those homeowners face losing their homes.
  In my home State of Pennsylvania, the number of homeowners with 
subprime ARMs who are seriously delinquent has risen to 13.82 percent, 
an increase of over 40 percent since this time last year. Among 
homeowners who qualified for prime rate ARMs, the number who are 
seriously delinquent has increased to 2.43 percent, an increase of over 
50 percent since last year. Especially hard hit is the Allentown-
Bethlehem-Easton area, where the foreclosure rate for subprime loans 
originated in 2006 is 20 percent.
  In some cases, borrowers made bad decisions by ignoring the risk and 
taking on mortgages they knew someday they might not be able to afford. 
In other cases, it appears that borrowers were steered to riskier 
mortgages when they qualified for safer options. There is also evidence 
that lenders failed to fully disclose the risks involved with certain 
mortgages and instead emphasized low monthly payments. The push to 
issue subprime and adjustable rate mortgages was aggravated by Wall 
Street investors chasing high rates of return on the secondary market.
  Many homeowners facing foreclosure will seek relief in bankruptcy. 
Bankruptcy has traditionally provided a second chance for borrowers by 
giving them relief from their creditors. Chapter 13 in particular has 
enabled homeowners facing foreclosure to keep their homes. Chapter 13 
gives debtors breathing space by imposing a stay on collection of 
debts, including mortgages, which prevents lenders from foreclosing for 
a period of time. During that time, debtors are given an opportunity to 
get caught up on their mortgage payments. Finally, Chapter 13 makes it 
more likely that debtors will be able to make their mortgage payments 
over the long term by giving them a discharge from many of their other 
debts.
  However, the drafters of the bankruptcy code never anticipated the 
current crisis where so many face possible bankruptcy, not because of 
consumer debts, but because of their mortgages. When the current 
bankruptcy code was drafted in the late 1970s, most homeowners had 
traditional 30-year fixed rate mortgages with substantial down 
payments. As a result, few homeowners faced bankruptcy because of their 
mortgage. As such, the drafters did not see a need for bankruptcy 
judges to have the power to alter the terms of mortgages on primary 
residences.
  Given the fact that so many homeowners now face foreclosure and 
possible bankruptcy because of their mortgages, I believe Congress 
should take action. I am therefore introducing a targeted bill which 
will allow bankruptcy courts to provide relief to homeowners caught up 
in the current crisis. The bill will provide relief for low-income 
homeowners who, because of changed circumstances, can no longer afford 
their mortgages. Easily available credit made homeownership a reality 
for many lower income Americans. It is these same homeowners who are 
the ones now caught up in the credit crunch and facing the loss of 
their homes.
  The bill will allow bankruptcy judges to provide relief by 
restructuring the mortgage terms that have created the biggest problems 
for homeowners. Most importantly, the bill will allow bankruptcy judges 
to prevent or delay interest rate increases as well as to roll back 
interest rates that have already reset. This will make it possible for 
many more debtors to hold onto their homes in the long run.
  The bill also will allow bankruptcy judges to waive early repayment 
or prepayment penalties. Many lenders impose large penalties on 
homeowners that repay their mortgages early, penalties that prevent 
many homeowners from refinancing and switching to a sounder mortgage. 
These penalties are particularly egregious since they don't reflect any 
increased risk taken on by the lender. They are merely intended to 
discourage borrowers from making a better choice for themselves by 
switching to another loan.
  This bill is not a bailout and it is not aimed at those who knew the 
risk and proceeded anyway. When housing prices were rising, speculators 
bid up the prices of homes hoping to quickly sell them for an easy 
profit. With prices falling, many of those speculators find themselves 
with properties worth less than what they paid. These speculators took 
the risk that housing prices would fall and now must live with the 
downside of that risk.
  The bill will allow judges to write down the principal value of the 
loan, but only if both the debtor and creditor agree. Giving judges 
discretion to write down the principal value of loans could provide a 
significant windfall to those who gambled that housing prices would 
never fall, including speculators. That is a gamble lenders and future 
homeowners should not be forced to finance.
  Taking too broad an approach to this problem will only hurt future 
borrowers. Allowing bankruptcy judges free rein to rewrite mortgage 
loans will only increase the risk that lenders take on when they issue 
mortgages. Investors respond to increased risk by insisting on higher 
rates of return and

[[Page S12535]]

mortgage lenders must respond in kind by raising their rates. That will 
only make it more difficult for those Americans who wish to become 
homeowners in the future.
  In the longer run, the market will correct some of what has gone 
wrong. The number of risky loans being issued has already declined 
dramatically, in large part because investors are refusing to provide 
the liquidity necessary to issue such loans. In addition, as predatory 
or fraudulent practices come to light, the Congress, and in particular 
the Banking Committee, should take action to prevent such practices 
from occurring in the future.
  I urge my colleagues to join me in offering relief for those who are 
caught up in the current crisis and face losing their homes.
                                 ______
                                 
      BY Mr. DURBIN (for himself, Mr. Coburn, Mr. Feingold, and Mr. 
        Brownback):
  S. 2135. A bill to prohibit the recruitment or use of child soldiers, 
to designate persons who recruit or use child soldiers as inadmissible 
aliens, to allow the deportation of persons who recruit or use child 
soldiers, and for other purposes; to the Committee on the Judiciary.
  Mr. DURBIN. Mr. President, I rise today to introduce the Child 
Soldiers Accountability Act of 2007. This narrowly-tailored bipartisan 
legislation would make it a crime and a violation of immigration law to 
recruit or use child soldiers. Congress must ensure that perpetrators 
who commit this war crime will not find safe haven in our country.
  I would like to thank the other original cosponsors of the Child 
Soldiers Accountability Act, Senator Tom Coburn of Oklahoma, Senator 
Russell Feingold of Wisconsin, and Senator Sam Brownback of Kansas. 
This bill is a product of the Judiciary Committee's new Subcommittee on 
Human Rights and the Law, which is the first ever congressional 
committee dealing specifically with human rights. I am the Chairman of 
this Subcommittee and Senator Coburn is its ranking member.
  Up to 250,000 children currently serve as combatants, porters, human 
mine detectors and sex slaves in state-run armies, paramilitaries and 
guerilla groups around the world. These child soldiers are denied the 
childhood that our children and grandchildren have and to which every 
child has an inalienable right. Moreover, their health and lives are 
endangered.
  Children are recruited and used in combat situations because their 
emotional and physical immaturity makes it easy to mold them into 
obedient combatants who will witness and partake in horrific violence, 
often without comprehending their actions. Child soldiers are 
frequently recruited in areas of long-standing conflict where there are 
no longer eligible adults for recruitment. In many cases, they are 
provided with drugs and alcohol to numb them to the atrocities they are 
required to commit, as well as to increase their dependency upon the 
armed group.
  Children are more likely to be killed, injured or become ill in 
combat situations than adults. In combat, child soldiers have been 
forced to the front lines, sent into minefields ahead of older troops 
or even used for suicide missions.
  The devastating effects of war and abuse on the physical, emotional 
and social development of children are long lasting. Former child 
soldiers require extensive care and support from family and others in 
order to be rehabilitated and reintegrated into society. In the absence 
of such support, former child soldiers may comprise a generation of 
adults who will perpetuate conflict and undermine security, creating 
unforeseen challenges that our children will have to address.
  There is a clear legal prohibition on recruiting and using child 
soldiers. Under customary international law, recruitment or use of 
child soldiers under the age of 15 is a war crime. Over 110 countries, 
including the United States, have ratified the Optional Protocol to the 
Convention on the Rights of the Child, which prohibits the recruitment 
and use of child soldiers under 18.

  While there have been positive developments internationally in the 
prosecution of child soldier recruitment and use, especially by the 
Special Court for Sierra Leone, the ability of international tribunals 
or hybrid courts to try these cases is limited. The average perpetrator 
still runs very little risk of being prosecuted. National courts can 
and should play a greater role in prosecuting perpetrators.
  Unfortunately, recruiting and using child soldiers does not violate 
U.S. criminal or immigration law. As a result, the U.S. government is 
unable to punish individuals found in our country who have recruited or 
used child soldiers. In contrast, other grave human rights violations, 
including genocide and torture, are punishable under U.S. criminal and 
immigration law.
  This loophole in the law was identified during a hearing entitled 
``Casualties of War: Child Soldiers and the Law,'' held by the Senate 
Subcommittee on Human Rights and the Law. Ismael Beah, a former child 
soldier and author of the bestselling book A Long Way Gone: Memoirs of 
a Boy Soldier, testified at this hearing. Mr. Beah said this gap in the 
law ``saddens me tremendously'' and that closing this loophole ``would 
set a clear example that there is no safe haven anywhere for those who 
recruit and use children in war.'' Mr. Beah also posed a moral 
challenge to all of us:

       When you go home tonight to your children, your cousins, 
     and your grandchildren and watch them carrying out their 
     various childhood activities, I want you to remember that at 
     that same moment, there are countless children elsewhere who 
     are being killed; injured; exposed to extreme violence; and 
     forced to serve in armed groups, including girls who are 
     raped (leading some to have babies of commanders); all of 
     them between the ages of 8 and 17. As you watch your loved 
     ones, those children you adore most, ask yourselves whether 
     you would want these kinds of suffering for them. If you 
     don't, then you must stop this from happening to other 
     children around the world whose lives and humanity are as 
     important and of the same value as all children everywhere.

  The Child Soldiers Accountability Act will help to ensure that the 
war criminals who recruit or use children as soldiers will not find 
safe haven in our country and allow the U.S. government to hold these 
individuals accountable for their actions.
  First, this bill will make it a crime to recruit or use persons under 
the age of 15 as soldiers. Second, it will enable the government to 
deport or deny admission to an individual who recruited or used child 
soldiers under the age of 15.
  This legislation will send a clear message to those who recruit or 
use child soldiers that there are real consequences to their actions. 
By holding such individuals criminally responsible, our country will 
help to deter the recruitment and use of child soldiers.
  I urge my colleagues to ask themselves the question Ishmael Beah 
posed: Would we want our children or grandchildren to endure the pain 
and suffering that Mr. Beah and other child soldiers face? As Mr. Beah 
reminded us, the lives of child soldiers are just as important as those 
of our children and grandchildren. We have a moral obligation to take 
action to help these young people and to stop the abhorrent practice of 
recruiting and using child soldiers.
  I urge my colleagues to support this legislation.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                S. 2135

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Child Soldiers 
     Accountability Act of 2007''.

     SEC. 2. ACCOUNTABILITY FOR THE RECRUITMENT AND USE OF CHILD 
                   SOLDIERS.

       (a) Crime for Recruiting or Using Child Soldiers.--
       (1) In general.--Chapter 118 of title 18, United States 
     Code, is amended by adding at the end the following:

     ``Sec. 2442. Recruitment or use of child soldiers

       ``(a) Offense.--Any person who knowingly recruits, enlists, 
     or conscripts a person under 15 years of age into an armed 
     force or group or knowingly uses a person under 15 years of 
     age to participate actively in hostilities--
       ``(1) shall be fined under this title, imprisoned not more 
     than 20 years, or both; and
       ``(2) if the death of any person results, shall be fined 
     under this title and imprisoned for any term of years or for 
     life.
       ``(b) Attempt and Conspiracy.--Any person who attempts or 
     conspires to commit an

[[Page S12536]]

     offense under this section shall be punished in the same 
     manner as a person who completes the offense.
       ``(c) Jurisdiction.--There is jurisdiction over an offense 
     described in subsection (a), and any attempt or conspiracy to 
     commit such offense, if--
       ``(1) the alleged offender is a national of the United 
     States (as defined in section 101(a)(22) of the Immigration 
     and Nationality Act (8 U.S.C. 1101(a)(22))) or an alien 
     lawfully admitted for permanent residence in the United 
     States (as defined in section 101(a)(20) of such Act (8 
     U.S.C. 1101(a)(20));
       ``(2) the alleged offender is a stateless person whose 
     habitual residence is in the United States;
       ``(3) the alleged offender is present in the United States, 
     irrespective of the nationality of the alleged offender; or
       ``(4) the offense occurs in whole or in part within the 
     United States.
       ``(d) Definitions.--In this section:
       ``(1) Participate actively in hostilities.--The term 
     `participate actively in hostilities' means taking part in--
       ``(A) combat or military activities related to combat, 
     including scouting, spying, sabotage, and serving as a decoy, 
     a courier, or at a military checkpoint; or
       ``(B) direct support functions related to combat, including 
     taking supplies to the front line and other services at the 
     front line.
       ``(2) Armed force or group.--The term `armed force or 
     group' means any army, militia, or other military 
     organization, whether or not it is state-sponsored.''.
       (2) Statute of limitations.--Chapter 213 of title 18, 
     United States Code is amended by adding at the end the 
     following:

     ``Sec. 3300. Recruitment or use of child soldiers

       ``No person may be prosecuted, tried, or punished for a 
     violation of section 2442 unless the indictment or the 
     information is filed not later than 10 years after the 
     commission of the offense.''.
       (3) Clerical amendment.--Title 18, United States Code, is 
     amended--
       (A) in the table of sections for chapter 118, by adding at 
     the end the following:

``2442. Recruitment or use of child soldiers.''; and
       (B) in the table of sections for chapter 213, by adding at 
     the end the following:

``3300. Recruitment or use of child soldiers.''.
       (b) Ground of Inadmissibility for Recruiting or Using Child 
     Soldiers.--Section 212(a)(3) of the Immigration and 
     Nationality Act (8 U.S.C. 1182(a)(3)) is amended by adding at 
     the end the following:
       ``(G) Recruitment or use of child soldiers.--Any alien who 
     has committed, ordered, incited, assisted, or otherwise 
     participated in the commission of the recruitment or use of 
     child soldiers in violation of section 2442 of title 18, 
     United States Code, is inadmissible.''.
       (c) Ground of Removability for Recruiting or Using Child 
     Soldiers.--Section 237(a)(4) of the Immigration and 
     Nationality Act (8 U.S.C. 1227(a)(4)) is amended by adding at 
     the end the following:
       ``(F) Recruitment or use of child soldiers.--Any alien 
     described in section 212(a)(3)(G) is deportable.''.
                                 ______
                                 
      By Mr. DURBIN (for himself and Mr. Schumer):
  S. 2136. A bill to address the treatment of primary mortgages in 
bankruptcy, and for other purposes; to the Committee on the Judiciary.
  Mr. DURBIN. Mr. President, over 2 million families are going to lose 
their homes in the next few years. Mr. President, 28,000 of those 
families are in Illinois.
  Why?
  Because they are stuck in bad mortgages.
  Homeowners across America don't need to hear from me to know that the 
housing boom has busted. From Wall Street to Main Street, we see the 
spillover effects on the economy.
  I am pleased that in Congress we are now talking about how to tighten 
lending regulations so we don't repeat this type of market meltdown--
and there is certainly more work to be done on that--but in the 
meantime, millions of families are stuck in the current mess. They need 
our help.
  It is true that some families knowingly stretched a bit to buy more 
house than they should have. But many families were sold mortgages they 
couldn't afford by unscrupulous brokers. Some families were given 
faulty appraisals, only to find later that their homes weren't worth as 
much as they thought. Still other families have been hit with a 
mountain of excessive fees that have pushed them over the edge.
  Regardless of the reason, a family pushed into foreclosure is a 
disaster for the homeowner and the surrounding community, and it is a 
bad deal for the banks as well.
  That is why I am introducing the Helping Families Save Their Homes 
Act, which will help around 600,000 families who have nowhere else to 
turn to save their homes.
  I support the constructive efforts of all of my Democratic colleagues 
in both the Senate and the House to deal with this crisis, and with 
this bill I add one more targeted solution to that list.
  Bankruptcy should be the last resort, to be sure, but this change in 
how family homes are treated in bankruptcy will help hundreds of 
thousands of families who would otherwise be out on the street.
  Today, a bankruptcy judge in Chapter 13 can change the structure of 
any secured debt, except for a mortgage on a principal residence. When 
this exception was added to the law in 1978, mortgages were largely 30-
year fixed rate loans that required 20 percent down and were originated 
by a local banker who personally knew the homeowner. In 1978, it was 
rare for the mortgage to be the source of financial difficulty that 
sent a family into bankruptcy.
  The mortgage market has changed since then, to put it mildly. Now, 
unregulated out-of-town mortgage brokers can sell exotic ``no-doc,'' 
``interest-only,'' ``2-28,'' or other mortgages to families, with few 
questions asked. The mortgages are then securitized by big banks and 
sold into the secondary market to investors who have no knowledge of 
the homeowner's financial situation. Risk is dispersed, but so is 
responsibility.
  In 1978, when a family realized it might begin having trouble making 
the house payments, it could go down to the local bank and work out a 
new plan to keep up. Today, families struggle to even get a straight 
answer on the phone.
  As the New York Times documented on Sunday, one homeowner made around 
670 phone calls to her loan servicer over a 3-month period in an 
attempt to work out a modified mortgage that she could pay and that 
would still be profitable to the bank. She spoke to 14 different people 
and received nine different answers on how she should proceed. 
Community activists confirm that this type of struggle is not unusual. 
For millions of families who are nearing foreclosure, this just isn't 
good enough.
  We need another solution for families that aren't being helped by 
their bank.
  If mortgages on vacation homes and family farms can be modified in 
bankruptcy, why can't mortgages on primary homes?
  My bill would allow bankruptcy judges to work out payment plans with 
homeowners and banks and would also protect families from excessive 
fees.
  The bill would help families who are at risk of losing their homes. 
But it also protects property values for every other family on that 
block. In fact, this change in the way mortgages are handled in 
bankruptcy would save an estimated $72.5 billion in existing property 
values for the neighborhood, since each foreclosure on a neighborhood 
block reduces the property value for every other family on that block.
  As for the banks? Foreclosures cost banks around $50,000 to process, 
so every home saved from foreclosure represents a good deal for them 
too. My bill would allow judges to modify mortgages only in ways that 
would still be profitable for the banks and their investors.
  Everybody wins, right? Well, the banks are still opposing this bill, 
so I would like to take a moment to directly address some of the 
primary complaints that I have heard. There are too many families in 
need--and this bill makes too much sense--for the bill to be shot down.
  While everyone seems to agree on the problem--millions of families 
are going to lose their homes when the variable rate loans that were 
originated in 2005 and beyond begin to reset, and fall--some argue that 
we shouldn't do anything to help these families keep their homes in 
bankruptcy. I have heard three main complaints, none of which stand up 
to scrutiny.
  The first complaint is that banks are already helping homeowners with 
their mortgage problems, and so this change is unnecessary.
  In fact, the banks aren't doing nearly enough. A recent study by 
Moody's Investors Service Inc. found that the 16 largest subprime 
servicers, which manage a combined $950 billion of loans, modified just 
1 percent of the loans that were made in 2005 and that reset in 
January, April, and July. Shouldn't we try to help some of the other 99 
percent of homeowners who are at risk of

[[Page S12537]]

foreclosure but who could make payments on a different mortgage that is 
still profitable for the banks?
  The second argument is that Congress shouldn't modify the bankruptcy 
code again so soon after the 2005 amendments were implemented.
  However, the changes made to the bankruptcy code in 2005 had nothing 
to do with mortgages on primary residences. My bill would change 
elements of the code that date from 1978.
  Would the banks argue that the tax code shouldn't be changed in 2007 
because a completely unrelated area of the tax code was modified in 
2005? Not if they don't want to get laughed out of the Finance 
Committee room, they wouldn't.
  Finally, I have heard that allowing mortgages on principal residences 
to be modified in bankruptcy would introduce ``uncertainty'' in the 
market and would cause the market for loans for low-income families to 
dry up.
  But mortgage lending is a hypercompetitive market. There is no 
evidence to suggest that a full-scale exodus will occur because of a 
change to the bankruptcy law. Banks are still willing to lend for 
vacation homes and family farms and those mortgages can be modified in 
bankruptcy, so this argument has no basis in fact.
  As a spokesman from JP Morgan Chase said in the American Banker: ``It 
is always in the best interest of the servicer, the borrower, and the 
investors if we can modify a loan, because foreclosure means there's no 
chance the investor is going to recoup their money.'' It should make no 
difference if a modification is agreed to outside of the context of 
bankruptcy or within it, if the modification itself is identical.
  I would like to conclude by noting that only families that 
desperately need this help will file for bankruptcy, and only 
reasonable mortgages will result. My bill has been carefully 
constructed to avoid unintended consequences in several ways:
  First, families that are helped by these changes to the law have to 
live within the strict IRS spending guidelines for Chapter 13 filers. 
Families that don't desperately need the help will be very unlikely to 
try to take advantage of this provision.
  Second, every mortgage restructured by a bankruptcy judge will be a 
better deal for the banks and investors than foreclosure. The minimum 
value of the mortgage in a restructured deal would be the fair market 
value of the home, which is the same price the bank would earn if it 
sold the house after a foreclosure. Plus, the banks will avoid the 
average of $50,000 in foreclosure fees.
  Finally, giving bankruptcy judges the flexibility to restructure 
mortgages should provide an incentive for banks and investors to do 
more to restructure mortgages outside of bankruptcy, which is in 
everyone's best interest.
  I repeat that quote from a major bank: ``It is always in the best 
interest of the servicer, the borrower, and the investors if we can 
modify a loan, because foreclosure means there's no chance the investor 
is going to recoup their money.''
  I agree. It shouldn't be so hard for customers to modify their loans 
outside of bankruptcy since it's in everyone's best interest to do so. 
But allowing families to modify loans within bankruptcy as a last 
resort so they can keep their homes is the right thing to do.
  This bill is supported by the AARP, ACORN, AFL-CIO and SEIU, the 
Center for Responsible Lending, the Consumer Federation of America, 
NAACP and La Raza, the National Association of Consumer Bankruptcy 
Attorneys, the National Community Reinvestment Coalition, and many 
others.
  I urge my colleagues to support this bill, and I look forward to 
helping families save their homes. Over the next few years, hundreds of 
thousands of families will desperately need it.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                S. 2136

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Helping Families Save Their 
     Homes in Bankruptcy Act of 2007''.

                    TITLE I--MINIMIZING FORECLOSURES

     SEC. 101. SPECIAL RULES FOR MODIFICATION OF LOANS SECURED BY 
                   RESIDENCES.

       (a) In General.--Section 1322(b) of title 11, United States 
     Code, is amended--
       (1) in paragraph (10), by striking ``and'' at the end;
       (2) by redesignating paragraph (11) as paragraph (12); and
       (3) by inserting after paragraph (10) the following:
       ``(11) notwithstanding paragraph (2) and otherwise 
     applicable nonbankruptcy law--
       ``(A) modify an allowed secured claim secured by the 
     debtor's principal residence, as described in subparagraph 
     (B), if, after deduction from the debtor's current monthly 
     income of the expenses permitted for debtors described in 
     section 1325(b)(3) of this title (other than amounts 
     contractually due to creditors holding such allowed secured 
     claims and additional payments necessary to maintain 
     possession of that residence), the debtor has insufficient 
     remaining income to retain possession of the residence by 
     curing a default and maintaining payments while the case is 
     pending, as provided under paragraph (5); and
       ``(B) provide for payment of such claim--
       ``(i) for a period not to exceed 30 years (reduced by the 
     period for which the loan has been outstanding) from the date 
     of the order for relief under this chapter; and
       ``(ii) at a rate of interest accruing after such date 
     calculated at a fixed annual percentage rate, in an amount 
     equal to the most recently published annual yield on 
     conventional mortgages published by the Board of Governors of 
     the Federal Reserve System, as of the applicable time set 
     forth in the rules of the Board, plus a reasonable premium 
     for risk; and''.
       (b) Conforming Amendment.--Section 1325(a)(5) of title 11, 
     United States Code, is amended by inserting before ``with 
     respect'' the following: ``except as otherwise provided in 
     section 1322(b)(11) of this title,''.

     SEC. 102. WAIVER OF COUNSELING REQUIREMENT WHEN HOMES ARE IN 
                   FORECLOSURE.

       Section 109(h) of title 11, United States Code, is amended 
     by adding at the end the following:
       ``(5) Paragraph (1) shall not apply with respect to a 
     debtor who files with the court a certification that a 
     foreclosure sale of the debtor's principal residence has been 
     scheduled.''.

              TITLE II--PROVIDING OTHER DEBTOR PROTECTIONS

     SEC. 201. COMBATING EXCESSIVE FEES.

       Section 1322(c) of title 11, the United States Code, is 
     amended--
       (1) in paragraph (1), by striking ``and'' at the end;
       (2) in paragraph (2), by striking the period at the end and 
     inserting ``; and''; and
       (3) by adding at the end the following:
       ``(3) to the extent that an allowed secured claim is 
     secured by the debtor's principal residence, the value of 
     which is greater than the amount of such claim, fees, costs, 
     or charges arising during the pendency of the case may be 
     added to secured debt provided for by the plan only if--
       ``(A) notice of such fees, costs or charges is filed with 
     the court before the expiration of the earlier of --
       ``(i) 1 year after the time at which they are incurred; or
       ``(ii) 60 days before the conclusion of the case; and
       ``(B) such fees, costs, or charges are lawful, reasonable, 
     and provided for in the underlying contract;
       ``(4) the failure of a party to give notice described in 
     paragraph (3) shall be deemed a waiver of any claim for fees, 
     costs, or charges described in paragraph (3) for all 
     purposes, and any attempt to collect such fees, costs, or 
     charges shall constitute a violation of section 524(a)(2) of 
     this title or, if the violation occurs before the date of 
     discharge, of section 362(a) of this title; and
       ``(5) a plan may provide for the waiver of any prepayment 
     penalty on a claim secured by the principal residence of the 
     debtor.''.

     SEC. 202. MAINTAINING DEBTORS' LEGAL CLAIMS.

       Section 554(e) of title 11, United States Code, is amended 
     by adding at the end the following:
       ``(e) In any action in State or Federal court with respect 
     to a claim or defense asserted by an individual debtor in 
     such action that was not scheduled under section 521(a)(1) of 
     this title, the trustee shall be allowed a reasonable time to 
     request joinder or substitution as the real party in 
     interest. If the trustee does not request joinder or 
     substitution in such action, the debtor may proceed as the 
     real party in interest, and no such action shall be dismissed 
     on the ground that it is not prosecuted in the name of the 
     real party in interest or on the ground that the debtor's 
     claims were not properly scheduled in a case under this 
     title.''.

     SEC. 203. RESOLVING DISPUTES.

       Section 1334 of title 28, United States Code, is amended by 
     adding at the end the following: ``Notwithstanding any 
     agreement for arbitration that is subject to chapter 1 of 
     title 9, in any core proceeding under section 157(b) of this 
     title involving an individual debtor whose debts are 
     primarily consumer debts, the court may hear and determine 
     the proceeding, and enter appropriate orders and judgments, 
     in lieu of referral to arbitration.''.

[[Page S12538]]

     SEC. 204. ENACTING A HOMESTEAD FLOOR FOR DEBTORS OVER 55 
                   YEARS OF AGE.

       (a) In General.--Section 522(b)(3) of title 11, United 
     States Code, is amended--
       (1) in subparagraph (B), by striking ``and'' at the end; 
     and
       (2) in subparagraph (C), by striking the period at the end 
     and inserting ``; and''; and
       (3) by adding at the end and inserting the following:
       ``(D) if the debtor, as of the date of the filing of the 
     petition, is 55 years old or older, the debtor's aggregate 
     interest, not to exceed $75,000 in value, in real property or 
     personal property that the debtor or a dependent of the 
     debtor uses as a principal residence, or in a cooperative 
     that owns property that the debtor or a dependent of the 
     debtor uses as a principal residence.''.
       (b) Exemption Authority.--Section 522(d)(1) of title 11, 
     United States Code, is amended by inserting ``or, if the 
     debtor is 55 years of age or older, $75,000 in value,'' 
     before ``in real property''.

     SEC. 205. DISALLOWING CLAIMS FROM VIOLATIONS OF CONSUMER 
                   PROTECTION LAWS.

       Section 502(b) of title 11, United States Code, is 
     amended--
       (1) in paragraph (8), by striking ``or'' at the end;
       (2) in paragraph (9), by striking the period at the end and 
     inserting ``; or''; and
       (3) by adding at the end the following:
       ``(10) the claim is subject to any remedy for damages or 
     rescission due to failure to comply with any applicable 
     requirement under the Truth in Lending Act (15 U.S.C. 1601 et 
     seq.), or any other provision of applicable State or Federal 
     consumer protection law that was in force when the 
     noncompliance took place, notwithstanding the prior entry of 
     a foreclosure judgment.''.

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