Letter Opposing S. 2636, the "Foreclosure Prevention Act of 2008"

February 26, 2008

 

TO THE MEMBERS OF THE UNITED STATES SENATE:

 

The U.S. Chamber of Commerce, the world's largest business federation representing more than three million businesses and organizations of every size, sector, and region, urges you to oppose S. 2636, the "Foreclosure Prevention Act of 2008," as introduced.
 
The Chamber opposes this bill because it improperly expands the bankruptcy code, granting new powers to bankruptcy judges to modify the terms of existing, legitimate mortgage contracts. Title IV of S. 2636 injects greater risk into the lending process; this increased risk will be evidenced in increased mortgage costs for primary residences in the form of higher interest rates, down payments, points, and fees.

 

The Chamber also opposes this legislation's attempt to roll back the longstanding federal policy in favor of arbitration of consumer disputes. S. 2636 would amend the Federal Arbitration Act to prevent a Bankruptcy Court from enforcing a valid arbitration agreement between a debtor and a company, if the debtor's debts "are primarily consumer debts." Like other recently introduced efforts to repeal or restrict the use of arbitration involving consumers or employees, this legislation would eliminate the well-recognized consumer benefits from arbitration with no justification. The Chamber believes that consumers benefit from quick and simple arbitration procedures that allow them to resolve their claims much more cheaply than in litigation, and in a less adversarial atmosphere.

 

While the Chamber opposes Title IV of this bill, the Chamber supports provisions that would stabilize and strengthen the housing market such as additional funding for credit counseling for consumers and increased flexibility to promote the use of mortgage revenue bonds. The Chamber also supports extending the net operating loss carry-back period.

 

While S. 2636 includes provisions that are worthy of its support, the Chamber remains concerned that expanding the bankruptcy code in an attempt to address subprime issues will only impede the progress Congress already has made in assisting troubled borrowers. The recently enacted economic stimulus package injects liquidity into the capital markets but Title IV of this legislation threatens to reverse this course by hampering the ability of mortgage services to help borrowers who are in trouble.

 

For these reasons, the Chamber urges you to oppose any efforts to bring S. 2636 to the Senate floor for consideration. The Chamber may consider votes on, or in relation to, this issue in our annual How They Voted scorecard.

Sincerely,
R. Bruce Josten