Projo Biz Blog

By Paul Edward Parker
Journal staff writer

PROVIDENCE, R.I. -- Homeowners need a Congressional "stick" when trying to negotiate new mortgage terms with national loan servicing companies as a way of avoiding foreclosure, witnesses told U.S. Sen. Sheldon Whitehouse at a Senate subcommittee field hearing Thursday morning.

"I didn't have any leverage or anything of that nature," Joseph Verdelotti Jr., a plumber from West Warwick, told Whitehouse, a Rhode Island Democrat.

Verdelotti said that he and his wife bought a house in 2006, near the height of Rhode Island's real estate market. As home values have fallen and the family budget has tightened, the Verdelottis have faced a labyrinth of bureaucracy in trying to deal with the companies that service their mortgages.

"What is lacking in the system is not a carrot; what is lacking is a stick," said John Rao, a lawyer with the National Consumer Law Center and a resident of Newport.

The "stick" that Rao and others advocated Thursday was what is known as "cram down," a process that would allow federal bankruptcy judges to rewrite the terms of a mortgage as part of bankruptcy proceedings.

Rao said that a similar provision years ago that applies to family farms prompted a dramatic rise in the number of cases in which banks renegotiated farm mortgages without the farmers ever having to file bankruptcy.

Whitehouse held the field hearing of the Senate Judiciary Committee's Subcommittee on Admininstrative Oversight and the Courts, of which he is the chairman, at the Rhode Island Housing office.

 Tags  economy mortgages Providence RI Sheldon Whitehouse

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