Citigroup is set to endorse a new Senate bill, CNBC’s Matt Nesto reported Thursday, that would allow bankruptcy judges to alter mortgages in an effort to prevent foreclosures. Cramer said the move, as long as mortgage principals were reduced, could spark “a major turn in housing.”
Diana Olick, during Thursday's Stop Trading!, reported the bill’s three conditions:
- The law applies only to loans that are issued up until the day this bill is passed. All loans, and not just subprime, are eligible.
- Borrowers have to show they made a “good faith” attempt to work with the lender before considering this bankruptcy provision. Bankruptcy cannot be the first option, and borrowers have to prove it wasn’t.
- Bankruptcy judges can strip away a lender’s credit or rights if they violated the Truth in Lending Act or other state and federal laws.