H.R. 1106 was a bill intended to slow foreclosures and revive the housing market during the severe economic downturn of 2008 and 2009. It gave bankruptcy judges the ability to modify mortgages on principal residences, allowed the Departments of Veterans Affairs and Agriculture and the Federal Housing Administration to guarantee and insure mortgage loans that are modified in bankruptcy, protected loan servicing companies that engage in loan modifications from civil claims, and made a permanent increase in the level of FDIC deposit insurance. This was a vote on the resolution or “rule” on H.R. 1106, which set the terms for House consideration of the bill, including the amendments that could be offered to it.
The debate on the rule for the legislation focused more on the merits of the bill than on the specifics of the rule itself. Rep. Hastings (D-FL), who was leading the effort for the rule, said the legislation would help revive the declining housing market, lessen home foreclosures and put the economy back on track. Referencing the provision of the legislation that would allow bankruptcy judges to modify loans on a homeowner's principal residence, he noted that some opponents of the measure have argued that the provision “will lead to a sudden slew of bankruptcy filings, will cause massive losses to financial institutions, and will increase the cost of borrowing for other homeowners.” He countered their argument by noting that, to be eligible for the reduction, homeowners would have to meet specified stringent requirements.
Hastings also argued that bankruptcy judges will have to determine that the homeowner acted responsibly, had a meritorious claim and had exhausted all options before they can adjust the mortgage. He said the new bankruptcy provision was important to enact because it “will maximize, not lessen, the value of troubled mortgages for lenders, and will avoid the continuous decline in property values in neighborhoods with foreclosed properties.”
Rep. Foxx (R-NC), who was leading the opposition to the rule, argued that the legislation” is not going to stop the problem that we have in the housing market . . . (it is actually) going to make it worse . . . (and it) is going to drive up the cost of loans in the future and . . . hurt people who have played by the rules.” Foxx said: “House Republicans support responsible homeowners who live within their means, who make honest representations on their loan applications, who pay their debts, and who work hard to achieve the American dream.” She then argued that the legislation does the opposite by rewarding what she termed “bad behavior”, and that the result of allowing bankruptcy judges to adjust existing home mortgages will be more expensive future mortgages. Among those opposing the legislation were the banking and mortgage lending industry and The Heritage Foundation, a conservative think tank. Rep. Lofgren (D-CA) responded to Rep. Foxx’ arguments by noting that bankruptcy judges were already permitted to adjust the balances on most other types of loans.
The rule passed by a vote of 239-181. All two hundred and thirty-nine “aye” votes were cast by Democrats. Seven other Democrats joined one hundred and seventy-four Republicans and voted “nay”. As a result, the House was able to begin debate on the bill intended to reduce the number of mortgage foreclosures and increase the availability of mortgage credit.