Thursday, March 12, 2009

Support Needed for Bankruptcy Loan Modification Bill

I recently wrote an article urging my fellow Republicans to support a bill giving bankruptcy judges the authority to modify home mortgages to prevent foreclosures. The battleground has now shifted to the Senate, which is gearing up to vote on the legislation . The bill is now known as S. 61, the “Helping Families Save Their Homes Act of 2009".

The premise for the bill is very simple. Experience has shown that lenders and loan servicers are only giving lip service to lofty promises to cooperate with struggling homeowners who need loan modifications. Unaffordable adjustable rate mortgages are still a major cause of bankruptcy and foreclosures in the United States. This bill would change that dynamic.

Under current bankruptcy law, a judge can modify almost any type of loan except the first mortgage on a debtor's home. This bill would allow judges to make changes such as extending payment terms, setting a fixed rate of interest or reducing payments. While this bill might cause a short term spike in bankruptcy filings, the long effect will be to force lenders to negotiate loan modifications in good faith. That is not happening right now. Some lenders are even foreclosing in the middle of negotiations without warning the home owner.

Please help by telling your Senators to support this bill. You can start at this link to learn more about the bill and then sign an online petition to show your support. Then you can click on this link to find contact information for your Senators. It does not matter whether you call, write, email or fax them, but make your voice heard very soon. As aptly stated by my colleague O. Max Gardner III, "This legislation is mandatory to make the voluntary modifications work."

About the Author: Carl H. Starrett II has been a licensed attorney since 1993 and is a member in good standing with the California State Bar and the San Diego County Bar Association. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.


David Baker said...

I heartily agree with Carl. I have never understood why every other kind of mortgage can be modified, but the most important kind - mortgages for the purchase of a home - can not.


David Baker, Esq.

Anonymous said...

We need urgently this bill. I am behind on my mortgage or line of credit with WAMU or Chase because my business is dead and last year my interest rate was double and I was paying near $1500. I am having a hard time finding a job. I am 56 free of drug, drinking or ganbling additions. Washington Mutual loan rep called in late March and said that if I made a payment on 3/31 for $775 that I will not go into foreclosure. I told them that I had roommate moving in on 4/1 that he would pay $800 (half for the room, rest as deposit. The move failed but I sent the payment anyway at tremendous hardship because they told me that if I made two more payments in time, I would qualify for a modification. On 4/4/09 I received a notice of Intent to Foreclosure. I called & I was told that I have to pay inmediately $717. I answered that I could not trust them now, that I needed something in writting or have a go between. A supervisor got on the line and said that I have to make two payments this month to stop the foreclosure.
I don't trust Washington Mutual.
They have no incentive to work with me. Last year I cashed an IRA and paid inmediately $4,150 in taxes which is gone to them instead of me since I don't qualify for unemployment.
Overwhelmed in WA
Jackie Dempere

Anonymous said...

I have a home that is serviced by Wells Fargo and held by EMC Mortgage Corp. We are consistently one to two months behind. We have read that Wells Fargo has been ripping off hundreds of homeowners by not negotiating modifications. We have also heard that EMC is also not working with homeowners and had a $28 million dollar lawsuit against them by the FTC. We are afraid to go into bankruptcy and deal with these people for a loan modification.

On May 20, 2009 the President signed the "Helping Families Save Their Homes Act," but we did not see anything regarding a judge having the power to modify a primary mortgage in a bankruptcy. Do judges now have the power to negotiate for a modification?

Responsible Homeowner, CA