07 Jan Helping Families Save Their Homes In Bankruptcy Act
Yesterday, Senator Dick Durbin introduced new legislation (S.61) titled the Helping Families Save Their Homes In Bankruptcy Act of 2009 . Also, the exact same legislation was introduced in the House of Representatives by Representative John Conyers.
This legislation, if passed, will allow Bankruptcy Judges to modify the mortgages on residential real estate, a practice which the current Bankruptcy Code prohibits. In the past, similar legislation failed to get the necessary support to move through Congress, and the President vowed to veto any bills containing the mortgage modification language.
However, the recession has changed some minds in Congress. This legislation seems to be on the fast track to be included in the new stimulus legislation that is also moving through Congress.
It appears that the Democrats in Congress were serious about making changes to help ease the country out of recession. Allowing Bankruptcy Judges to modify mortgages in Bankruptcy Court is not a new topic. Bankruptcy Judges deal with valuation of assets on a daily basis in Bankruptcy Courts across the nation.
This legislation is being supported by twenty three (23) State Attorney Generals. Likewise, AARP has made this one of their top priorities for 2009. On the election trail, then Senator Obama, made promises to amend the Bankruptcy Code to allow for such modifications, and I still hope he will keep his promise.
Of course there are two sides to every story, and if you listen to the doom and gloom crowd, you will hear how allowing Bankruptcy Judges to modify the terms and conditions of existing mortgages and promissory notes will result in banks not lending money and the whole industry will collapse.
The reality is simple. The industry will not collapse. The banks have received or will receive more than they should under the Bailout. We the taxpayers are bailing out everyone on a daily basis, and in the future, I’m sure the hand outs will continue. Why are we so afraid to help the working guy or gal? Hasn’t corporate America taken advantage of the working class long enough? How much money from the bailout has actually made it to Main Street?
Allowing people the opportunity to save their homes, modify the mortgages, and deal with all of their financial issues in one place will result in more people saving their homes and communities, and hopefully, provide families with more disposable income.
As a consumer bankruptcy attorney, I speak with people on a daily basis who are sick and tired of calling the mortgage company because they are passed around until they can find someone who can help. Then, they fill out a bunch of forms only to be told: You have to be 90 days in arrears before we can help you. That is absolute trash. Where does it say that in the mortgage or promissory note?
Likewise, attempting to modify the mortgage during the foreclosure process, while a bit easier with an attorney who knows his client, is often an exercise in futility if you are dealing with a securitized trust. So, the delinquent homeowner, may now have a place to turn to.
Bankruptcy is a process of bringing debtors and creditors together in a forum to deal with their financial issues. Adding one step in the process may seem like it will be harmful, but in reality, it will result in more people saving their homes and dealing with all of their financial issues.
Mortgage Companies and Servicers have had two years to help people modify mortgages and the results have been nothing short of horrible. I’ve read estimates that there will be 8 to 12 million more foreclosures in the next four years. Is this what we really want? Barack Obama ran on a platform of change. Let’s see if he keeps his word.
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