Not able to make your mortgage payments anymore? Are you considering filing for bankruptcy? If you are considering filing for bankruptcy keep an eye on the so-called "cramdown" bill. The bill, which is part of President Obama's housing plan and is making its way through Congress right now, would allow bankruptcy judges in Chapter 13 proceedings to reset the terms of certain mortgages so that more homeowners can keep their homes. The home must be a primary residence to qualify. Mortgages on rental properties or second homes will not qualify for this plan.
Currently, a Chapter 13 filing stops the foreclosure process and gives homeowners time to restructure their payments with their lender. But as the law stands right now, homeowner’s do not have the ability to alter the terms of their loans.
The passing of the “cramdown” bill would be a huge change…
Under the new bill, which has already been passed by the House of Representatives, the bankruptcy judge can reduce a homeowner’s principal balance as well as their interest rate. So let’s say that you have a $300,000 loan on a home whose value has fallen to $200,000. Under the new plan, a bankruptcy judge could eliminate $100,000 of the debt. Wouldn’t that be nice! It would be worth it to file bankruptcy just for this benefit!
Now - before you could qualify for a cramdown loan modification, you would have to show that you appealed to your mortgage lender for relief at least 15 days before you filed for bankruptcy. Easy enough right?
The plan will obviously help more people keep their homes, but the mortgage industry is not happy with the bill.
The mortgage industry opposes it because of concerns it will destabilize the housing market and lead to more bankruptcy filings. I agree with the mortgage industry that it will lead to more bankruptcy filings, but you cannot argue with homeowners who are paying on mortgage balances that are $100,000 - $200,000 more than the house is worth. There has to be some relief for these people. Let’s see what happens!
Check out www.thebriteway.com for your refinance and purchase needs!
Have a great Thursday!
Wednesday, April 22, 2009
Subscribe to:
Post Comments (Atom)
1 comment:
Having worked in the bankruptcy field for 8 years, I know what a dramatic effect this bill is going to have. I know my peers working in the bankruptcy field are waiting with baited breath for this bill to pass. Right now, pursuant to 11 USC section 1322(b)(2), the law allows no "lien stripping" of mortgages on primary residences. As the blog states, this really allows for no relief, even for those homeowners currently in a Chapter 13, from the upsidedowness of current mortgage balances. Let's hope this bill passes in order to offer some relief from this mortgage crises!
Post a Comment