Washington, D.C. – Congressman Dale E. Kildee (D-MI) joined his colleagues today in approving a measure that would allow judicial mortgage modification of loan terms for families who have exhausted their options to reduce their monthly payments. H.R. 1106, the Helping Families Save Their Homes Act of 2009, would allow bankruptcy judges to extend mortgage repayment periods, lower interest rates or waive prepayment penalties for homeowners in hardship, bringing some much-needed stability to housing markets.

“An empty home doesn’t pay a mortgage, and it won’t house a family,” said Kildee. “We all stand to lose if we do not stop the steep decline in home prices. Neighborhoods are struggling as each foreclosed home reduces nearby property values by as much as 9 percent.”

Stabilizing the housing market is central to restoring the American economy. The housing crisis even reduces the home values of the responsible homeowners who are not in danger of foreclosure, and it affects local tax revenues for municipal services and police and fire protection.

Judicial modification is not a new concept. Bankruptcy judges have maintained the ability to modify property claims including vacation homes, family farms and investment properties. The Helping Families Save Their Homes Act will balance the playing field for families struggling to make ends meet and only applies for mortgages originated prior to the bill’s enactment.

“At no additional cost to the taxpayer, this bill will provide homeowners an option to stay in their home with a mortgage payment that they and their lender can live with,” said Kildee. “Michigan’s unemployment rate is the highest in the nation, and it grew again today. Homeowners who are out of work cannot pay bills—they need options.”

Chapter 13 bankruptcy is a last resort for many families who are unable to make ends meet in the midst of this crisis. It is a strict and intrusive process that forces a family to open their finances up to the scrutiny and management of the courts for up to five years. To avoid bankruptcy at all cost, the bill requires that homeowners must have contacted their lender regarding loan modification and provided their lender a written statement of current income, expenses and debt before filing for bankruptcy relief.

H.R. 1106 is a key step in implementing President Obama’s comprehensive Homeowner Affordability and Stability Plan. The President announced details of his plan yesterday, including a website, www.financialstability.gov.