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January 26, 2009

Great Status Report on Proposed Legislation re Chapter 13 Modifications

Thanks to David P. Goch:

At yesterday's [1/22/09] House Judiciary Committee hearing on 2 bankruptcy bills, H.R. 200, the "Helping Families Save Their Homes in Bankruptcy Act of 2009," and H.R. 225, the "Emergency Homeownership and Equity Protection Act," intended to help families save their homes, all but one witness supported the bills put forth; and, for the most part, the Members in attendance were divided along party lines.

Witnesses including Reps. Miller (D-N.C.) and Marshall (D-Ga.); David M. Certner, legal counsel and legislative policy director of AARP; Matthew J. Mason, assistant director of the UAW-GM Legal Services Plan; and Adam J. Levitin, associate professor of law, Georgetown University Law Center all supported the bills.  The lone dissenter was Christopher J. Mayer, the Paul Milstein Professor of Real Estate and Senior Vice Dean, Columbia Business School.

Summarizing the position of the supporters, Mr. Levitin said "voluntary, private-market efforts to address the foreclosure crisis have all failed...bankruptcy is the only method that can fully address
the...problems."  Levitin went further postulating that bankruptcy mortgage loan modifications will not cause either higher mortgage interest rates or less credit availability.

Emphasizing this point, Mr. Mason testified that giving bankruptcy judges the power in Chapter 13 to modify mortgage loans on personal residences is "necessary."

Mr. Mayer, although agreeing that the mortgage crisis needed to be immediately addressed, stated the bill would "exacerbate problems" and would likely "bankrupt taxpayers and our financial system." Mayer's
suggestion was a three-pronged approach:

* Creating an incentive fee program to lien holders to avoid foreclosures coupled with legislation stating existing agreements can be modified by lien holders if modification is deemed to be better economically than foreclosure;
* Implementation of financial incentives for second lien holders to cooperate with any primary mortgage modification; and
* The federal government taking action to immediately reduce mortgage rates (possibly through issuing U.S. Treasury securities to fund new mortgages).

Ranking member Smith (R-Texas), taking Mr. Mayer's side in the debate, calling the legislation both "overly broad" and "open ended," and voiced his concern that the proposals "undermine personal accountability."

In related news, House Speaker Pelosi has indicated support for the proposals stating it is a "very high priority."  It is possible that the proposal might be added to the economic stimulus package (although
President Obama, while supporting the proposal, has said his preference is to not include it in the stimulus).  House majority leader Hoyer (D-MD) has stated the proposal enjoys wide support in both the House and Senate.

January 26, 2009 in Legislation | Permalink


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The most common mortgage modifications are listed below:

lowering the mortgage interest rate
reducing the mortgage principal balance
fixing adjustable interest rates within the mortgage
increasing the loan term throughout the mortgage
forgiveness of payment defaults and fees
or any combination of the above

Check out this public service site: http://mortgagemodificationinfo.org

Posted by: beachdude | Feb 1, 2009 7:21:47 AM

It is also necessary to make a pool of homes available for individuals that have lost their home, but could have afforded a modified monthly mortgage payment. We also need to release individuals that sought a loan modification or repayment plan from a lender and allow them to refinance their home under H4H program or as part of the FDIC's loan modification program.

Posted by: Veronica Raphael | Feb 4, 2009 3:40:25 PM

Do you think economic hardship checks will be issued again? Most people received around $400 and it seemed to kick start the economy.

It would be nice if some of that money could be put towards senior citizens prescription problems.

Just my 2 cents.

Posted by: Loan Modification Programs | Sep 24, 2011 1:15:59 AM

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