Action Alert: Homeowner Mortgage Rescue Restructuring bill scheduled for vote tomorrow in the House of Representatives
Judicial Supervision restructuring could save Millions of homes!
THE ISSUE:

We clearly need a multi-pronged approach to solving our Nation's foreclosure crisis and getting many of these homeowners into sustainable, long-term mortgages that accurately reflect the true market price of the home. One way to do this, at no cost to U.S. taxpayers, is to enact a minor reform of our nation's bankruptcy laws. Currently, if an individual files for bankruptcy, a judge cannot require a financial institution which is foreclosing on that person's home to renegotiate the loan to attempt to make it more reasonable and sustainable so that the person, and their family, can stay in their home. The subprime lenders who created this foreclosure crisis are able to seek relief through bankruptcy as well as investors, but homeowners trying to save their primary residence cannot.
Legislation (the Helping Families Save Their Homes in Bankruptcy Act of 2009, which was incorporated into H.R. 1106) was debated by the full House of Representatives last week and is due for a vote tomorrow, Thursday, March 5 2009. These provisions would help close the loophole and allow impartial judges to require lenders to enter into loan modification negotiations with a person facing bankruptcy. Court supervised loan modifications are a major solution to help families avoid foreclosure while still paying a market-rate mortgage for their home. It is estimated that if enacted this legislation could reduce coming foreclosures by 20% -- amounting to 1.8 million homes at no additional cost to taxpayers or investors.
Many foreclosures today could be avoided, although this is not happening because we are currently relying on lenders to voluntarily enter into modification negotiations. As a result, only 3.5 percent of delinquent subprime loans received modifications in August 2008 – and in many cases, these "modifications" actually increased the borrower's monthly payments. Clearly, current voluntary efforts to avoid foreclosures are insufficient, and we need to give judges who are dealing with homeowners facing foreclosure more power.
Many of the impending foreclosures are unnecessary because the homeowner could afford to pay a market rate mortgage, for the full current value of the house – an outcome that is far preferable to foreclosure for homeowner and mortgage lender alike. All the lender would have to do is to modify the loan to make it economically rational, and sustainable. H.R. 1106 would result in more mortgage modifications and fewer foreclosures, and could be a key tool in stemming the foreclosure crisis.