A.G. Lynch wants amended bankruptcy code

PROVIDENCE – R.I. Attorney General Patrick C. Lynch, along with the attorneys general of 21 other states, this month sent a letter to congressional leaders, asking that U.S. Bankruptcy Code be amended to protect against future foreclosures.
The code should be amended to allow federal Bankruptcy Courts to protect homeowners from foreclosures, Lynch’s office said.
“The record number of foreclosures is robbing people of the ability and the dignity to remain as homeowners and causing tenants to be tossed out on the streets,” Lynch said in a statement. “[In] Rhode Island and across the nation, the mortgage-foreclosure crisis is a tragedy for our times. It must be contained to help put our economy back on track and stem the damage and destruction caused to families and to neighborhoods.
“Our proposed amendment is a sensible approach to help alleviate this crisis and protect countless more people from being victimized.”
The attorneys general’s proposed amendment would allow bankruptcy judges to “re-adjust” debt for primary residences.
In the attorneys general’s letter, they stressed that voluntary loan modifications had “fallen short,” according to Lynch’s office.
“Because most troubled mortgages are securitized, multiple stakeholders may be involved in the decision to modify mortgage loans, causing a continued paralysis,” the letter said. “Although some major lenders have recently embarked on loan modifications on a wide scale, many servicers and secondary-market investors remain unwilling or unable to act, even when their own economic interests dictate otherwise.”