The word in the rumor mill is that Senator Schumer is in talks with Citigroup (NYSE: C) to get its backing for legislation that would allow judges to set new repayment terms for millions of mortgage holders who end up in bankruptcy court. Legislation to this effect was introduced this week.

It is hoped that Citigroup's lead on this issue will encourage other banks to join in backing the proposed legislation.

Plans to lower interest rates are helpful but may not stabilize the housing market because banks have tightened their lending standards making it more difficult for prospective buyers to get a mortgage. In addition, it does not help those who are already in foreclosure.

Foreclosures are fueling a downward spiral in home prices. Any legislation to stem this tide is a step in the right direction.

Meanwhile, pending home sales dropped to their lowest level since 2001 when the data was first collected.

Do you think this move will stem the foreclosures?

Hail to Senator Schumer! originally appeared on BloggingStocks on Thu, 08 Jan 2009 17:00:00 EST. Please see our terms for use of feeds.