The national statistics on the woeful number of modified mortgages support the Merc’s call to pass mortgage modification legislation
It’s estimated that a cramdown law could reduce foreclosures by 20 percent. It would cut through red tape by forcing reasonable compromises in bankruptcy courts, which can already modify mortgages on second homes and yachts. Most important, it would provide that all-important stick: Modify more mortgages, or a judge will do it for you.
Certainly, the experience of my clients supports the national numbers. While clients may be offered trial modifications (send us money while we shuffle your papers again), I’ve seen one permanent loan modification.
It’s depressing to repeat to clients that they have little or no negotiatino power with the lenders. It continues to be depressing to the economy as the amount of bank owned real estate increases.
As the recession has played out, foreclosure is no longer just the consequence of sub prime loans and over heated real estate market. It’s reaching a much broader swath of families. Falling home values make it economically rational to walk away from underwater properties.
We would all benefit from a legislative “stick” to balance the HAMP plan’s “carrot” for mortgage modification.