News

JPMorgan Chase & Co. and Citigroup Inc. are halting foreclosures for owner occupied homes.  Fannie Mae and Freddie Mac had done much the same thing at the end of last year, but lifted their moratorium in early January.  JPMorgan and Citigroup may be the first privately owned companies to stop foreclosing until the administration has a chance to do something constructive about the housing crisis.

Unfortunately, as my colleague, Cathy Moran noted, in her recent post, Moratorium on Foreclosures, this may be only a short lived attempt while the government looks at buying up tainted mortgages.  That isn’t going to help.

We need a long term solution to this crisis, not just a couple of months of relief for those lucky enough to be included in this foreclosure stoppage.  But you can bet that even if the foreclosure is stopped, the loan obligation continues to build.  Then the homeowner will be further behind with no solution.

The lenders should get behind the “Helping Families Save Their Homes in Bankruptcy Act of 2009” which will offer a permanent solution fair to both the homeowner and the mortgage company.

CNN reported this morning that the Senate worked on a Saturday to reach a compromise on President Obama’s stimulus package.  As originally written the package contained a foreclosure fix: letting bankruptcy judges modify mortgages.  Today’s package lives on without any help at all for a family about to lose their home.

But, if the stimulus package does pass, the next thing on the Senate’s agenda is supposed to be the “Helping Families Save Their Homes in Bankruptcy Act of 2009.”  Hopefully that will be soon. 

Most objective observers see the housing crash and foreclosure mess as a leading factor in the economy’s woes. One would think, therefore, that some form of foreclosure relief would be first on the agenda; not second.  But, I guess that’s not the way our government sees things, and those of us committed to helping people stay in their homes look for other alternatives and keep our fingers crossed for passage of this bill.  

The foreclosure rate is skyrocketing!  According to Bloomberg News, there were nineteen million homes seized in 2008!  The largest increase came in the fourth quarter of the year when there was an increase of 6.7 percent over the 4th quarter in 2007.

The vacancy rate, the share of empty homes for sale, rose to 2.9 percent in that  quarter, the highest percentage of all years according to data going back to 1956. The report also indicated that about a third of owners whose home values drop 20 percent or more below their loan principal will “hand the keys back to the bank.”

Giving Bankruptcy Judges the power to fix this and keep people in their homes needs to be the government’s highest priority.

JP Morgan Securities analysts have admitted that mortgage modification in bankruptcy may be a ” necessary evil” to stabilize  home values.

It ought to become harder for the banking industry to maintain that passage of a bankruptcy cram down bill will increase mortgage rates going forward, as the bill voted out of committee yesterday will apply only to loans in existence when the bill becomes effective.

Credit Suisse estimates that adding mortgage modification to the arsenal of bankruptcy judges might reduce the number of foreclosures by 20%.

Have you contacted your Congressman yet on this issue?  Find your represenatives in Washington and speak out in favor of mortgage modification.

The House Judiciary Committee today reported the bill to enable mortgage modification in bankruptcy to the full House after addition of a “claw back” provision.  The added provision provides for a declining percentage of net sales proceeds to be paid to the crammed down lender if the house is sold during the pendency of the bankruptcy for more than the modified loan amount.

The added provision for sharing of post bankruptcy appreciation gives the afffected lender 80% of the appreciation from a sale in the first year from the effective date of the plan; 60% in the 2nd year; 40% in the 3rd year; and 20% in the 4th year.

Also added to the bill was a provision that the debtor must seek a mortgage modification directly from the lender at least 15 days before proposing a plan that modifies a mortgage.  The lender presumably has an opportunity to negotiate a modification on its own terms before the bankruptcy court can impose a modification.

The last word from the banking industry was adamant opposition to judicial mortgage modification.  Industry lobbyists did not, as far as I could tell, propose an alternative that might actually stop the foreclosure tsunami.

The National Association of Consumer Bankruptcy Attorneys reports that:

The House Judiciary Committee will meet at 1 p.m. ET today to mark up (consider) HR 200, the “Helping Families Save Their Homes in Bankruptcy Act.”  At the time of the mark up there will be a manager’s amendment offered by Chairman Conyers that will embody the language changes agreed to in the Citigroup discussions and I expect there will be a few other changes as well.
You may watch a webcast of the mark up by going to:
http://judiciary.house.gov/hearings/caltoday.html.
The bill is expected to pass by a narrow margin; we don’t expect there will be any Republican votes in favor and we expect there may be a Democrat or two who opposes.
If you live in districts represented by any of the following Members, please call them THIS MORNING in support of H.R. 200 (phone numbers may be found at www.house.gov)
•    Daniel B. “Dan” Maffei (D-NY)
•    Robert Wexler (D-FL)
•    Brad Sherman (D-CA)
•    Adam B. Schiff (D-CA)
•    Charles A. Gonzalez (D-TX)
•    Pedro Pierluisi (D-PR)
Other Members of the Committee include:
•    John Conyers (D-MI) Chairman
•    Howard L. Berman (D-CA)
•    Rick Boucher (D-VA)
•    Jerrold Nadler (D-NY)
•    Robert C. “Bobby” Scott (D-VA)
•    Melvin L. Watt (D-NC)
•    Zoe Lofgren (D-CA)
•    Sheila Jackson-Lee (D-TX)
•    Maxine Waters (D-CA)
•    William D. Delahunt (D-MA)
•    Steve Cohen (D-TN)
•    Henry C. “Hank” Johnson (D-GA)
•    Luis V. Gutierrez (D-IL)
•    Tammy Baldwin (D-WI)
•    Anthony D. Weiner (D-NY)
•    Linda T. Sánchez (D-CA)
•    Debbie Wasserman Schultz (D-FL)