27 Jan Bankruptcy Modification Will Prevent 20% of Foreclosures
A recent report by Credit Suisse estimates that bankruptcy modification of home loans will help reduce foreclosures by 20 percent and will help stabilize the housing market according to a Reuters article. Proposals to permit U. S. bankruptcy judges to modify the terms of loans secured only by the personal residence of the debtor are pending before both the House of Representatives and the Senate. Much has been written about this pending legislation on this blog and on the sister site BankrutpcyLawNetwork.
With this in mind, it is shocking to contemplate any sort of delay in the passage of this much needed change to our bankruptcy laws. However, it appears that yet again politics has reared its ugly head and the critically important bankruptcy reform provisions have been removed from the stimulus bill that is barreling down the legislative fast track in congress. According to legislative sources, the administration does not want to risk passage of the massive financial package by including help for homeowners facing foreclosure.
During his presidential campaign, Barack Obama promised a 90-day moratorium on home foreclosures. Despite that promise, now that he is president, no such moratorium has yet been proposed. In the meantime, bankruptcy reform is postponed and increasing numbers of middle income homeowners are being foreclosed and evicted from their homes. The loss of these homes hurts not only the individual homeowners who are foreclosed, it impacts the entire neighborhood and put more empty, bank owned houses on the already glutted residential real estate market.
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