The national foreclosure crisis is deep into the negative equity phase, as reported in the Christian Science Monitor this week.

Negative equity, that is, your home is underwater, worth less than you owe on it.

As I have been blogging for years, the answer is judicial mortgage modification, Congress amending Chapter 13 to allow the bankruptcy court to modify mortgage balances down to the value of the home.

HAMP has failed in its announced goal of avoiding foreclosure and keeping homeowners in their home.

Over half of the HAMP modifications are already in default.

There are several reasons.

One, people are told, you can keep your home if you pay us (mortgage company) X dollars per month.

Wanting to keep their homes, they say yes, but cannot really afford the payments.

Of course, the government program pays the mortgage servicers for doing loan modifications, whether they succeed or fail.

So the incentive on that side of the fence is to write a modification and get the check from the government.

Objections?

Oh, that moral hazard thing.

The one the Federal government keeps violating by saving the “too big to fail” institutions that created this mess.

They made bad loans, hundreds of thousands of them, and the taxpayer bailed them out by taking over Fannie Mae and Freddi Mac, and TARP, and so on.

I do not understand where the moral hazard is.

If I am going to be foreclosed, and the bank takes my house, and sells it for what it is worth, that is fine.

But, if I pay them what it is worth, saving them all the costs of foreclosure, that is a moral hazard.

Using the Chapter 13 process means sworn statements of income and assets, and a trustee reviewing tax returns and pay stubs.

The banks failure to do the same is how they wrote so many bad loans.

And the government wants people to borrow and spend, spending what they do not have to boost the economy.

Well, that, at least is consistent.  Governments have been doing it for years.

Where is the economy going to be with 9 million more foreclosures, that many more taxpayers leaving their community, that many families moving.

Foreclosure Crisis – The Next Phase

Related posts:

1. The Truth About The Foreclosure Crisis
2. Did Bankruptcy Reform Worsen Foreclosure Crisis?
3. Michigan Foreclosure Crisis Continuing

Per the American Bankruptcy Institute web site:

As the House Judiciary Committee approved mortgage cramdown legislation yesterday by a vote of 21-15, Democratic leaders are preparing to wrap it into the omnibus spending package slated to come to the House floor next week, CongressDaily reported today. House Judiciary Chairman John Conyers (D-Mich.) made three changes to the bill requested by Citigroup Corp. in exchange for its support: to limit eligibility to loans made before the date of enactment, to require borrowers to notify their lenders 15 days before filing for bankruptcy and to establish that only major violations of the Truth In Lending Act would invalidate creditor claims during a bankruptcy proceeding. The manager’s amendment includes a provision to allow a lender to recover funds if the borrower later sells the house for a profit. It also would clarify that the bill would not change any obligations for loans backed by the VA, USDA or FHA, whose mortgages are fully insured against losses in foreclosure. The bill is likely to change more before it comes to the floor.

Chapter 13 Bankruptcy Reform Passes House Judiciary Committee

Related posts:

1. Update-Chapter 13 Bankruptcy Reform
2. Chapter 13 Bankruptcy Reform Update
3. Chapter 13 Bankruptcy Reform – Bankers Oppose

Stunning news, the bailed out, whose appetite, and need, for our money knows no bounds, oppose Chapter 13 bankruptcy reform that would let homeowners avoid foreclosure and keep their homes by allowing bankruptcy courts to re-write the terms of their mortgages.
It is time to yell (OK, maybe speak) to our representatives, that they have tossed away enough of our money to the crooks whose greed fed the crisis leading to the foreclosure tidal wave, and it is time for Chapter 13 bankruptcy reform that cost taxpayers NOTHING!
OK, I did not mean to shout, but I get excited.
Click on link to contact your local politician.
But, time is short, so make it an email, or fax the letter.

Chapter 13 Bankruptcy Reform – Bankers Oppose

Related posts:

1. Chapter 13 Bankruptcy Reform Passes House Judiciary Committee
2. Chapter 13 Bankruptcy Reform Update
3. Update-Chapter 13 Bankruptcy Reform

Per O. Max Gardner, North Carolina bankruptcy lawyer extraordinaire:
John Logan and the NACTT objected to the proposed Mortgage Bankruptcy
Bill because it mandated direct payments on the modified mortgage. I
have been a big supporter of Conduit Payments for years and we are
working on a new Conduit Payment Rule for the WDNC. I am pleased to
report that NACBA and NACTT have met and resolved their differences on
the Bill. The NACTT has now agreed to support the Bill with these
changes:

1) The direct payment language in 1322(b)(11)(D) would be change to: by
providing for payments of such modified loan either directly to the
holder of the claim or during the term of the plan, through the trustee
as disbursing agent, in the discretion of the court.

2) Section 586 would be amended to cap trustee fees on 1322(b)(11)
payments disbursed by trustees at 4%.

3) Section 586 would also be amended to state that the 4% fee may be
waived by the court for debtors below 150% of poverty if it would render
the plan in feasible.

The Bad News for the Bill is that based on a request from President
Obama the Bankruptcy Reform Bill has been removed from the $825 billion
Emergency Stimulus bill.

Chapter 13 Bankruptcy Reform Update

Related posts:

1. Update-Chapter 13 Bankruptcy Reform
2. Chapter 13 Bankruptcy Reform – Bankers Oppose
3. Chapter 13 Bankruptcy Reform Passes House Judiciary Committee