April, 2009:

Foreclosure prevention and coping with foreclosure, either as a homeowner or a tenant,  will be the focus of a workshop in Oakland Wednesday April 29th.

The workshop will be held at the West Oakland Teen Center from 3 p.m. to 5 p.m.

More details when I can find them.

Meantime, it appears that the mortgage modification bill may come up in the Senate for a vote next week.  Bank opposition is threatening its defeat.  Be heard.

Foreclosure prevention counseling, credit counseling, and loan modification help will be available at the Santa Clara County Fairgrounds noon to five p.m. April 23rd.

The event is sponsored by the City of San Jose’s housing department and other local housing organizations.  Homeowners are asked to bring their original loan documents, bank statements, mortgage statements, tax returns and paystubs.

More information is available at www.foreclosurehelpsc.org or at 408 794-1242.

The elderly, the unsophisticated, and non English speakers are a significant part of  my clients who need access to mortgage modification in bankruptcy.  The Wall Street Journal reported on a number of victims of unscrupulous mortgage brokers, sold loans by means of false representations.  The facts all rang true to me.

My two lawyer firm has seen in the past year at least three cases of elderly Hispanic couples with limited or no English and fixed incomes being solicited for interest only, adjustable rate loans.  The loan documents signed by the homeowners were all in English, which they couldn’t read if they’d tried.  Absent either a lawsuit or a legislative solution, these folks will lose their homes.

It is clear that these cases are not unique;  they are part of a pattern of exploitation that went on at the height of the easy money, housing bubble. These are not people who “bought more home than they could afford.”  They are victims of crimes that no one seems to care about prosecuting.

So, what do we do as a society about the foreclosure situation?  Given the scope of the problem, we need a low cost, broadly available, routinized approach to modifying  home loans that will stabilize the housing market, encourage home buying by halting waves of foreclosure, and spreading the pain of the solution between borrowers and lenders.

Thus far, all of the approaches to the mortgage mess have thrown money at the banks, the very folks who made this crisis possible.  Evidence is that the tax dollars are not trickling down in any way that keeps families in their homes.

When will the Senate grasp that some new thinking is necessary and  allow use of Chapter 13 to address mortgage modification?

One in eight US homes is at risk of foreclosure, and the mortgage bankers continue to block a remedy that costs the tax payers nothing. I continue to marvel that the very folks who created this crisis by making utterly foolish loans have any credibility on Capitol Hill.  Maybe their money continues to talk persuasively.

Conservatives preach that permitting mortgage modification in bankruptcy violates the sanctity of contract.  Hello?  Bankruptcy is all about the rights of the parties when a contract is breached.  This is nothing new.  Prof. Levitin points out that a contract need not be a suicide pact.

Bankruptcy  doesn’t  create financial failure; imposes rules and structure on the consequences of failed finances (personal or corporate).

Bankruptcy is no one’s preferred choice:  watch the auto industry trying to avoid it.  But rejecting a bankruptcy remedy will not staunch the bleeding  in neightborhoods gutted by foreclosures. Certainly, there is no evidence that the lenders are willing or able to craft a solution in voluntary negotiations with borrowers, even assuming borrowers have any partity at the negotiating table.

The most often repeated reason to reject judicial modification is that “it will increase the cost of future loans.”  That’s what the realtors of Silicon Valley believe.  They cannot have read the bills introduced in Congress which limit modification to loans in place before 2009.  There is nothing in  S. 61 which will have any impact on the pricing of future home loans.

What is the cost of doing nothing?  Judicial mortgage modification allocates the cost of a fix between the borrower and the lender or the lender’s successors.  No taxpayer money involved.

The disputes among economists about the preferred approach to our wider financial debacle seem pretty much confined to just how big the sum of money required to get us back on track, not  whether the government should intervene.  It is a time for new thinking and targeted new approaches to the housing component of the problem.   Just providing money and tax breaks for those who buy foreclosed houses seems a callous and backward approach to waves of foreclosures.

But judicial modification isn’t even that radical;  it exists for every loan but the ones that count in our economy, the home loan.  It’s time to repeal the special interest legislation that protects home lenders from economic realities in bankruptcy court.  Or the banks will own even more real estate than they do now, and families and neighborhoods will lose.