In January 2009, I was in the unusual position of asking my fellow Republicans to support legislation sponsored by the Democrats that would have given bankruptcy judges the capability of modifying mortgages in a Chapter 13 bankruptcy. Click here to read my original article. Unfortunately, this legislation failed to pass in the Senate. I have now received word that the concept of judicial loan modification in Bankruptcy Court could be resurrected.
Congress will soon be considering amendments to H.R. 4173, the Wall Street Reform and Consumer Protection Act, that would give consumers a powerful negotiating tool to use when trying to negotiate loan modifications with intransigent lenders. I am once again urging my fellow Republicans to set aside outdated perceptions of irresponsible borrowers and support this legislation.
President Obama's loan modification program, commonly known as Home Affordable Modification Program or HAMP, has been a dismal failure. As of September 2009, only about 1700 homeowners had received "permanent" loan modifications under the HAMP program. As any bankruptcy attorney can tell you, experience has shown that lenders have very little motivation to modify loans. Consumers have seen their 90-day "trial payment periods" under HAMP drag on for months with no sign of a permanent loan modification offer in sight.
The threat of an involuntary loan modification in bankruptcy court may be the only way to force lenders and loan servicers to take loan modifications seriously and to stop dragging their collective heals in offering reasonable solutions.
I am urging all of my readers, colleagues and clients to contact their representatives in Congress by going to http://clerk.house.gov/member_info/mcapdir.html and urging them to support amendments to this bill that would give bankruptcy judges the power to modify residential mortgage loans.
With 3 million new foreclosures expected in 2010, the ongoing foreclosure crisis will continue to cause a rise in bankruptcy filings and undermine any hope of an economic recovery.
Unlike the expensive bailouts provided to the big lenders, this change to the Bankruptcy Code will not cost taxpayers one penny and will help stabilize the economy. The voluntary loan modification programs simply are not working.
So if the Republican Party wants to stop looking like it is out of touch with reality, supporting this legislation might be a good first step in fixing the public's perception of the party.
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, the San Diego County Bar Association and the National Association of Consumer Bankruptcy Attorneys. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.
Post a Comment