Arlen Specter: “The essence of the amendment would provide authority to the bankruptcy court to deal with variable interest rate…”

“The essence of the amendment would provide authority to the bankruptcy court to deal with variable interest rate mortgages, where we find people have been surprised by the acceleration of obligation. It is illustrated by a mortgage where the monthly payments were $1,079 and then raised to $1,444--an increase which was not expected by the borrower. Another illustration of a variable interest rate mortgage is where the monthly payments were $1,400, which were raised to $1,900 a month. This would give the bankruptcy courts authority to deal with these changes. Under these circumstances, the borrowers did not know how much the payment would be increased. Frequently, there is misrepresentation, and on some occasions there is even fraud. This amendment was distinguished from the amendment offered by Senator Durbin, which would have provided for bankruptcy courts to have authority to modify the principal. That was defeated largely because it would have created a problem for lending in the future when prospective lenders would not have confidence their contracts would be fulfilled.”