Bill Backs Borrower -Initiated Plan To Save Foreclosure
The US Senate had introduced a Bill to back borrower-initiated plan to save foreclosure from taking hold of the property and it was binding on the lenders as well. The Bill had been introduced in the House (H.R.3609) and the Senate (S. 26360) was prepared to provide workouts that would be initiated by the suffering house-owners and mandatory on the lenders. It would allow bankruptcy judges to reframe the loan contracts by either lowering the interest rate or by reducing the principal amount of the mortgage loan. The policy intended to make loan repayments more affordable to borrowers.
According to legal experts, the bankruptcy law of 1993 prohibits modification of mortgage contracts of primary residences by bankruptcy judges and so the law needed an amendment to enforce the plan modified by the bankruptcy judges. Besides, the greatest advantage of the plan was that there would be no extra burden on tax-payers.
Dean Baker of the Center for Economic and Policy Research had proposed another plan for house owners in trouble. The plan termed as ‘own-to-rent’ required house owners facing foreclosure to live in their houses as tenants and pay rent at the existing market rate and not pay the mortgage amount as owners, which was higher than the rentals they would have to pay. Borrowers qualified under the plan would be identified at the median house price in a metropolitan area and was unlikely to benefit house owners belonging to the high-income group. The plan would not burden taxpayers either. A bill to the same effect was recently put up at the House (H.R.6116).
The present foreclosure crisis had taken a back seat in political circles that had decidedly little to comment on foreclosure crisis and anti-foreclosure policies, although it was evident that the foreclosure crisis would intensify in the months to follow. Consequently more house owners would join the bandwagon and demand for more suitable policies to address their problem. The house-owner initiated policies were preferred over the lender-initiated policies in that they gave maximum protection to the house owners against foreclosure. It was desired however that both the options be available to all, especially to low- and moderate-income borrowers.
The bill had the support of AFL-CIO, SEIU, NAACP, ACORN, the Center for Responsible Lending and other consumer protection groups.
The only snag in the bill was that the borrower would have to declare bankruptcy and the Mortgage Bankers Association was vehemently opposing the bill from coming into force.
[...] Source: Nehathegreat [...]