[WASHINGTON, D.C.] – U.S. Senator Dick Durbin (D-IL) chaired a Senate Judiciary Committee hearing today on the foreclosure crisis facing American homeowners and its impact on families, communities and the economy. Durbin, one of the first in Congress to warn that the subprime mortgage meltdown could lead to a larger economic crisis, argued that hundreds of thousands of at-risk homeowners could keep their homes if allowed to alter the terms of their mortgages in bankruptcy.

“One year ago, I chaired a hearing before this Committee on the looming foreclosure crisis facing our nation and sadly, many of the dire predictions we heard at last year’s hearing have not only come true, but in fact the situation has become far worse than anyone imagined,” Durbin said.

In the fall of 2007, Durbin introduced the Helping Families Save Their Homes in Bankruptcy Act; a bill which would allow mortgages on primary residences to be restructured in bankruptcy – like virtually every type of personal debt, including vacation homes and family farms. This small change to the bankruptcy code could help hundreds of thousands of homeowners avoid foreclosures while continuing to fulfill their new mortgage obligations.

Over the past year, Durbin has tried three times to pass this proposal - as part of Majority Leader Reid’s housing bill in the spring, as part of the Senate Banking Committee’s housing bill in the summer, and as part of the financial rescue bill this fall.  Each time, the Mortgage Bankers Association and most of the financial services industry opposed the proposal.  

“The question that faces us now is this: after committing over one trillion dollars in taxpayer money to what has largely been an unsuccessful effort to address the foreclosure crisis and save our economy from a devastating recession, why don’t we take a step that would indisputably reduce foreclosures and that would cost taxpayers nothing?” Durbin asked.

Testifying at today’s hearing was Sheriff Tom Dart from Cook County, Illinois. Last month, Sheriff Dart temporarily suspended foreclosure evections in Cook County due to the large number of foreclosures involving rental properties and the strain evections have put on his department.

Just two years ago, there were 18,916 mortgage foreclosure cases filed in Cook County. This year, Sheriff Dart projected that 43,000 will be filed. In just two years, foreclosure evictions have nearly tripled from 1,771 evictions in 2006, to nearly 4,500 this year.

“All you have to do is drive down one of the many blocks our eviction teams drive down each and every day – from the wealthiest suburbs to the inner-city neighborhoods – and the effects of this crisis are easy to see,” Sheriff Dart said. “It’s clear from the economy, as well as the continuing rise in foreclosure cases, that the time for talking has long passed. A solution – a bold stand - is needed now.

Dart went on to describe the story of a 74-year old widow who had to turn for help from the Chicago Coalition for the Homeless, after losing her South Side home to foreclosure in August. After her husband died in 2003, their son moved in to help pay the bills on a house that had been in their family for 20 years. When her son got sick, she re-financed her home with an adjustable rate mortgage in an effort to make ends meet. When her rate changed she was unable to keep up with payments. Her bank refused to help and she lost her family’s home.

“This is just one example of the very hard-working people in this country whose lives have been destroyed and who simply need help to survive,” Dart said.

A large coalition of groups has voiced their support of Durbin’s Helping Families Save Their Homes in Bankruptcy Act. They include: AARP, AFL-CIO, Leadership Conference on Civil Rights, NAACP, Service Employees International Union, Consumer Federation of America, National Association of Consumer Bankruptcy Attorneys, Center for Responsible Lending, Consumers Union, National Fair Housing Alliance, Opportunity Finance Network, Consumer Action, Association of Community Organizations for Reform Now, Central Illinois Organizing Project, Lawyers’ Committee for Civil Rights Under Law, National Association of Consumer Advocates, National Community Reinvestment Coalition, National Consumer Law Center (on behalf of its low income clients), and U.S. PIRG.

Also testifying at today’s hearing were: Michael D. Calhoun, President of the Center for Responsible Lending; Professor Adam J. Levitin of the Georgetown University Law Center; David G. Kittle, CMB, Chairman of the Mortgage Bankers Association; Scott Stengel, a Washington lawyer who specializes in bankruptcy law; and Dr. Christopher J. Mayer, Senior Vice Dean and Paul Milstein Professor of Real Estate at Columbia University’s Graduate School of Business.