Plans Are Afoot In a Big Way to Help Foreclosure Victims
With permission being given to bankruptcy judges to modify plans it can be said with certainty that plans are afoot in a big way to help foreclosure victims. Judges can now, if required, reduce loan payments by decreasing the principal amount. Very soon this proposal will become a reality.
Just a few weeks ago the measure to allow judges to judge on matters of upside-down mortgages (those mortgages in which the loan amount was greater than the value of the house) had reached a dead-end with no hopes for survival. However soon that will become history. Rep. John Conyers Jr. (Democrat) introduced a revised version of the bankruptcy expansion suggestion in the House. It came a day following the intense lobbying faction that had opposed the move. Important advisors of President-elect Obama support the reform clauses. Among them is Lawrence H. Summers (former secretary of the Treasury) who will be chairperson of the National Economic Council in the new government.
The Chief Executive of the National Association of Home Builders, Jerry M. Howard said that his association would no longer block the proposal. He explained that the continuation of foreclosures in this climate of recession has led to them to think anew and open doors to new ideas. He said, “The situation’s deteriorated so much (that) every proposal needs to be considered.”
The proposal about the bankruptcy judges had been taken out of the bailout bill last September when the National Association of Home Builders had vociferously opposed it in tandem with the Mortgage Bankers Association and other groups in industry. The Mortgage Banker Association had argued that by permitting the judges to enforce principal write-downs would ultimately lead to higher interest (higher by 2%) for all other mortgages. This would lead to increase in monthly payments for the borrowers.
After the volte face no official from the Mortgage Bankers Association was available for comment.
Howard, speaking on behalf of the National Association of Home Builders explained the new flexible approach of his group said it was “a huge acknowledgement by the home-building community that in this crisis, old doctrines don’t necessarily fly.” However he added that the association had given the nod to a temporary expansion of the provisions related to bankruptcy and not a permanent one. The building group is sensible in not opposing mortgage modifications by the court, as this will keep more people in their houses and fewer numbers of foreclosures. This will check competition the builders are facing from the foreclosed houses.
