House OKs bill to modify mortgages

2009-03-06T11:52:00.000-08:00

Senate expected to soon debate its own version of the 'cramdown' bill that will allow bankruptcy judges to reduce mortgage debt.

From money.cnn.com

WASHINGTON (Reuters) -- Bankruptcy judges could cut the mortgage debt of homeowners in bankruptcy court as a last resort to avert foreclosure, under a bill approved by a 234-191 vote Thursday in the U.S. House of Representatives.

Seen by Democratic supporters as vital to stabilizing the crumbling U.S. real estate market, the so-called "cramdown" bill has been opposed by bankers, despite amendments to limit its scope, including one restricting it to existing mortgages.

The Senate was expected to consider its own version of the House bill soon, but chances of passage are uncertain.

The House bill has additional provisions meant to help homeowners in the worst housing market in decades, a slump that has helped pull the U.S. economy into a deepening recession.

Under present law, bankruptcy courts may reduce many forms of debt for struggling borrowers -- including a boat, car, vacation home or family farm -- but not a primary residence.

0:00 /1:03Obama takes on housing

Changing bankruptcy law to allow this, say bankers and Republican opponents of the bill, would raise costs for everyone by diverting capital from the mortgage debt market.

But Democrats backing the bill discount such fears and say it could sharply cut the high U.S. home foreclosure rate.

About one in eight U.S. homeowners with mortgages, a record share, ended 2008 behind on payments or are in the foreclosure process, a mortgage industry group reported Thursday.

President Obama launched a $75 billion foreclosure relief plan Wednesday, part of a $275 billion housing stimulus program announced last month.

Meant to dovetail with that program, the House bill also contains a provision that would give mortgage service firms legal protection if they try to revise distressed loans.

Mortgage servicers collect the monthly payments made by homeowners. Servicers are now often hamstrung by legal agreements with mortgage-backed securities investors that can force servicers to foreclose on delinquent borrowers.

The "safe harbor" provision in the bill would shield servicers from legal action by mortgage-backed securities investors whose returns could be crimped by eased loan terms.

House minority leader John Boehner, R-Ohio, criticized the bill.

"When it comes to housing, today is another example of why taxpayers are fed up with the way Washington works," he said. "The American people are sick and tired of Washington forcing taxpayers to pay for those who have been irresponsible."

But Michael Calhoun, president of the Center for Responsible Lending, a homeowner advocacy group, praised the House's passage of the bill.

"Hundreds of thousands of families have lost their homes unnecessarily and tens of millions of neighboring families have watched the value of their homes plummet. We urge the Senate to act quickly to approve this bill and put it on President Obama's desk for his signature," Calhoun said.

The bill would also overhaul the under-performing Hope for Homeowners program, an effort to help struggling mortgage borrowers drawn up last year by Congress that attracted little interest due to its high cost and complexity.

In addition, federal deposit insurance coverage would rise permanently to $250,000 from $100,000 and the Federal Deposit Insurance Corp's credit line with the Treasury Department would rise to $100 billion from $30 billion, under the bill.

First Published: March 5, 2009: 6:39 PM ET

Foreclosure Glut Clogging Courtrooms; Will Obama Make it Better or Worse?

2009-02-20T11:05:00.000-08:00

Interesting Questions:

from Real Estate Investing For Real | A BiggerPockets Investment Property Blog by Joshua Dorkin

According to CBS News, “For homeowners who haven’t paid their mortgage in Lee County Florida, the end of the line is a courtroom where a judge whips through more than 400 cases in a single morning, reports CBS News correspondent Kelly Cobiella. They call it the “rocket docket.”

The article goes on to show how the typical case in the Lee County court lasts a whopping 18 seconds; it is definitely worth checking out!

That said, if judges are overwhelmed now, lets just think about what is going to happen as a result of the ~~$75~~ $275 Billion Obama Housing Bailout.

Am I alone in thinking that perhaps the real bailout is for lawyers and judges to handle all the upcoming foreclosure cases that result from this plan?

Foreclosure Glut Clogging Courtrooms; Will Obama Make it Better or Worse?

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2009-02-05T12:54:00.001-08:00

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2009-02-04T15:36:00.000-08:00

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House OKs bill to modify mortgages

Senate expected to soon debate its own version of the 'cramdown' bill that will allow bankruptcy judges to reduce mortgage debt.

Foreclosure Glut Clogging Courtrooms; Will Obama Make it Better or Worse?

Featured article

Coming Soon