Posts Tagged ‘Bankrupty’

Loan Modification Program That Could Be

October 31, 2009

 The current home modification program is failing.  The modification process is a long and time consuming process that can take as long as 6-months before a homeowner knows if they qualified.  If they didn’t, they are usually 6-months further behind on their mortgage with almost no hope for saving their home. Even bankruptcy judges have begun to show their distain for the extremely slow modification process.  See 

Earlier this year a bill was approved by the U.S. House of Representatives which would have allowed judicial modifications of homes in bankruptcy.  However, lobbyists such as the Mortgage Bankers Association and others in the credit industry have lobbied Congress claiming such provisions would make mortgages more expensive.  The Helping Families Save Their Homes in Bankruptcy Act of 2009 was introduced early in the 111th Congress (2009-2010) in both the House of Representatives originally as H.R. 200 by Representative John Conyers, a Michigan Democrat, now H.R. 1106, and S 61 in the US Senate by Senator Richard Durbin, an Illinois Democrat.  

The bill would have allowed individuals who didn’t qualify under one of the current programs a final option other than foreclosure.  The bill would have allowed the debtor to cramdown the mortgage loans to his or her current fair market value of the property.  The bankruptcy judge would then have been allowed to develop an affordable plan for the homeowner to continue making payments.  More importantly, the proposed bill attempted to appease the lobbyists by forcing the debtor to attempt to qualify under one of the current loan programs and limited the loans to existing Fannie Mae and Freddie Mac conforming loan limits.  However, even with these attempts to protect lenders inserted into the bill, the Senate has failed to pass it. 

Currently, the Bankruptcy Code does not allow these so called “cramdowns” or “judicial modifications.” However, under a Chapter 13, debtors are able to strip off a second mortgage if they can show that the second mortgage is a wholly unsecured creditor.  While this process provides homeowners with some relief it may not be enough.  Most debtors may not qualify to strip off the lien because there is some value secured to the loan.  Something else is needed.  American’s should cry out to their Senators and Congressmen to support bills like H.R. 1106 and S61 which have not been passed.  I urge you all to contact your Senators and Congressmen in support of a new modification program.  

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 If you are interested in discussing these provisions further feel free to contact us for a free consultation at We are a debt relief agency and assist people in seeking relief under the Bankruptcy Code.