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March, 2009:

Compromise Reached on Housing Bill

Mar 5th, 2009
by Doug Jacobs.
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A compromise was reached on House Bill 1106- the Housing modification bill. Bankruptcy judges will still have the authority to modify a mortgage in a chapter 13 bankruptcy, but under more limited circumstances than as originally proposed.

The two most significant changes in the compromised package are that the “crawl back” provisions will last for four years. This is a clause in the legislation whereby a home owner, who has reduced her mortgage through a Chapter 13, and then sells her house for a profit, will have to repay some of that profit to the mortgage company that was forced to modify the mortgage.

The second major change is a restriction that would deny a modification through the bankruptcy court if the mortgage company had, outside of bankruptcy, offered a “reasonable” modification to the homeowner that was turned down.

The vote on this new bill may come as early as today.

Why do homeowners get limited relief with mortgage

Mar 4th, 2009
by Cathy Moran.
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As the shape of a political compromise on the Helping Families Save Their Homes in Bankruptcy Act  emerges, I wonder why modifications for homeowners will come hedged with prerequisites and conditions.

For the past three decades, a debtor in bankruptcy could modify a mortgage on anything but his home.  That included a vacation home.  No need to seek a consensual modification first, be threatened with foreclosure,  prove inability to pay.   The law did not condition the bankruptcy judge’s ability to confirm such changes to the original contract.

But offer that same ability to American homeowners, a frightening percentage of whom are at risk of losing their homes, and the bankers, the moralists, and the conservatives protest.  ‘Fraid I don’t understand.

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