Congress is considering changes to Chapter 13 bankruptcy law which would allow bankruptcy judges to modify mortgage loans on a homeowner's principal residence. Today, the only way to modify the mortgage is with the lender's cooperation. Meaningful modifications are slow, rare and difficult.
The House of Representatives passed HR 1106 on March 5; consideration of the Senate version, S. 61, is pending in the Senate. Passage in the Senate is not assured, as the banking industry and credit unions lobby intensely for a continuance of the current situation.
This site will examine the legislation, called Helping Families Save Their Homes in Bankruptcy Act of 2009, and its probable application in the real world.
We will follow the bill and report on its progress through Congress. The Senate is expected to take the bill up the week of April 27. Word is circulating that Senator Durbin will propose a narrowing of eligibility for modification to those who have not been offered a voluntary modification compliant with the Home Affordable program.
We will provide convenient links for you to voice your support for this legislation to those who represent you in Congress.
The need
Homeowners with troubled mortgages or pending foreclosure know how difficult it is to even discuss a mortgage modification with the lender or the servicer of the loan. All the voluntary industry-funded programs have made little impact on the numbers of homes threatened by foreclosure.
Those modifications that have been approved have been overwhelmingly too little to make a difference.
By empowering bankruptcy courts to alter home mortgages, something they are currently prohibited from doing, homeowners can expect protection from foreclosure while a plan is developed. Rules will be enacted guiding the process, and a referee (in the form of the judge) will enforce the modification.
The bill
The bills offer a means to halt cascading foreclosures at no cost to the taxpayer. If the homeowner is unable to negotiate a loan modification, a Chapter 13 plan could modify the loan within statutory parameters.
Read the affected sections of the Bankruptcy Code as they would be if the House passed version is enacted.
President Obama singled out this change to bankruptcy law as being an intergral part of his recently announced housing plan.
Contact your representatives in Congress. Urge the immediate passage of the Helping Families Save Their Homes in Bankruptcy Act of 2009.
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Come back regularly to follow the progress of the bill and, we hope, its implementation in bankruptcy courts throughout the country. Also, join us on our companion blog NorCalMortgageMods where we will report, comment, and advocate for this vital change to bankruptcy law with a particular focus on Northern California.