Mortgage Modifications In Bankruptcy – A New Wave Is Beginning

29 Jan Mortgage Modifications In Bankruptcy – A New Wave Is Beginning

Recently, Senator Jeff Merkley from Oregon has been speaking very loudly about the need for the current Congress to amend the Bankruptcy Code to allow cramdowns of first mortgages on primary homesteads. If you recall, the same proposal was attempted by Senator Dick Durbin from Illinois back in 2009.

This time, Senator Merkley may have some additional ammunition in his arsenal. The recent jobs report is horrible. The housing market is in the toilet, and we are facing over a million additional foreclosures in 2011. Likewise, we now learn that the Federal Government is considering scraping the HAMP Program. Let’s face it right now, this Country is in a mess and there is no plan to bring us out of it. Most Americans are living paycheck to paycheck without the security of knowing if they can save their completely underwater homes. Most Americans are still being told that they have to be behind 90 days before anyone will help them.

There are still over 300K mortgage foreclosure suits being filed in the United States, and that is unacceptable to me. The HAMP program is a failure, I agree, but that doesn’t mean we should stop looking at the situation to come up with better ideas.

Senator Merkley is proposing this legislation because it is comprehensive. It will not only allow a homeowner to save their homes by reducing the principal to what the house is actually worth, it will also allow the homeowner to craft a financial plan to deal with all of their debts under the Bankruptcy Judge’s supervision. Accordingly, there will be no unfair and deceptive dealings. Everything will be in the open, and the homeowner will not have to live in fear of losing everything that they have ever worked for. As if they haven’t lost enough already.

Merkley’s plan contains another component. He wants to implement a refinancing option to provide homeowners facing foreclosure the option to refinance at current rates and home values.

I think that one of the most important provisions in the Merkley plan would suspend foreclosures while the mortgage modifications were being considered. I have never, and I mean never, spoke to one person who sent in their mortgage modification documents one time and a decision was rendered. They may be out there, but I haven’t heard about them. I have heard from and about individuals who sent in their paperwork multiple times.

I agree with Senator Merkley’s plan. I believe it is well thought out and will not only create jobs, but will provide stability to the American public. Sure, the number of personal bankruptcies will increase, but the number of foreclosures will drop. The number of Americans paying their mortgages will increase. The number of people working will increase. Trust me, if you tell someone that they can save their homes by taking a less paying job. The homeowners would be inspired to take any type of work knowing that they are providing for their families.

This blog was written by Carmen Dellutri, Esq. of The Dellutri Law Group, P.A.

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Carmen Dellutri is a proud member of the Florida Bar, and he is a Board Certified Consumer Bankruptcy Attorney, Certified by the American Board of Certification. He practices in the areas of Consumer Bankruptcy and Plaintiff's Personal Injury. He is the principal attorney at The Dellutri Law Group, P.A. The firm supports many charitable and civic causes by donating time and much needed capital to our community. Mr. Dellutri and the other attorneys in the firm routinely speak to students of all ages about various legal and societal issues.
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