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Can Collective Union Action Force Mortgage Modifications?

By Peter Orville, Attorney at Law

Congress has been unable to pass any legislation that would allow for effective modification of mortgages. And the HAMP program is failing miserably.  Two New York unions, however, have come up with the idea that collective action through the market may get the needed results. The heads of the Transport Union Workers and the United Federation of Teachers in New York are urging their pension fund trustees to sell stocks and bonds invested in JPMorgan Chase (?Chase?) if the company does not do more to modify the mortgages of struggling homeowners.

The two unions combined have approximately $311 million invested in Chase, so the threat to pull the money out is not a hollow one. Legislation has been proposed in the recent past that would have allowed for modification of home mortgages in a Chapter 13 bankruptcy, but those bills were killed before their passage largely due to intense lobbying on the part of the mega-banks. Struggling homeowners do comprise a collective group, though they lack the necessary organization to promote their interests, especially when matched against the large and well funded lobbying groups for mortgage holders and realtors.  The rather novel notion of the unions here is that the needed organization is already present and when that organization is combined with sincere market pressure, it may prove enough to get the necessary results.

Individual homeowners simply do not have the requisite power to force these mortgage holding behemoths to modify their mortgages. However, when individual homeowners are aligned in a collective group coupled with a market incentive for the mortgage holders to act, modification seems a much more attainable goal. Perhaps other unions with such pension investments will get on board for collective action. The ?union collectives? may have the necessary size to make an impact through the market that government has proved unwilling or unable to achieve.

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Full post as published by Credit Law Network on February 20, 2011 (boomark / email).