A couple of months ago, I shared some thoughts with you on a bill that was being debated in the U.S. House of Representatives, called HR 3609, or the “Mortgage Modification Bill.” The essence of this bill is to allow bankruptcy judges to modify the terms of a debtor’s mortgage loan to make it easier for the debtor to make payments and avoid foreclosure. In other words, a bankruptcy court, were this bill to be passed, could “override” the original mortgage agreement for a person filing Chapter 13 bankruptcy. For example, the court could lengthen the term of repayment, extending a 15 year mortgage to 30 or even 40 years, could put “caps” on the interest rates and make them lower than the adjustable rate document would allow. (I think you can see how this would be of enormous help to a debtor, and also why the creditor might not be happy with the arrangement whereby control rests with the court and not with the lender!)
In my earlier blog, when I was first discussing this piece of legislation, I explained that the Mortgage Bankers’ Association was strongly opposed to the bill, claiming it would result in more risk to the mortgage lenders, who would then raise interest rates for everyone! (The bill itself deals only with existing loans, but the Mortgage Brokers Assn. felt that once the courts were given power to alter contracts after both parties had agreed to them, a dangerous precedent would be set.)
Since I first wrote on this topic, a lot has happened – and even more has not! First of all, HR3609 was passed by the House Judiciary Committee last December. Since then, however, things have stalled, and debate continues. Meanwhile, as I mentioned earlier this week, the Hope Now project is underway to support homeowners and forestall foreclosures.
It seems everyone is on the same page about the problems homeowners are having, but not necessarily on the same page about what would be the best long term solution. Meanwhile, in my Indiana bankruptcy law offices, I just keep on helping people, answering questions, and figuring out strategies, one debtor and one problem at a time!