Posted by Hugh Nations Signing Agents of Austin on 7/14/07 2:46pm
Msg #199913

From the Saturday, July 14, NY Times

Note the next to last paragraph.

Rising mortgage delinquencies are likely to be followed by rising consumer bankruptcies and, with them, the first big test of the federal bankruptcy reform law of 2005. Early indications are that low- to middle-income borrowers will be unduly punished.

The new law’s expensive and cumbersome requirements have already discouraged some hard-pressed homeowners from seeking bankruptcy-court protection, even in the face of dire circumstances such as spiking monthly payments coupled with job loss or medical expenses. Of the debtors who do enter bankruptcy proceedings, many are required to restructure their debts — negotiating with lenders to lower loan balances and stretch out repayments — rather than being allowed to liquidate them.

But here’s the trap: The restructuring process, known as Chapter 13, prohibits the bankruptcy court from modifying the repayment terms of most mortgages on a primary home. So even under a restructuring plan, bankrupt homeowners must still repay their mortgages in full or lose their homes.

That lender protection is a holdover from 30 years ago, when mortgage bankers required ample downpayments and most home loans had fixed interest rates. Because lenders were conservative and stuck to uncomplicated loans, they were shielded from having to take a hit when homeowners filed for bankruptcy.

But the modern-day mortgage market is neither conservative nor uncomplicated. Many of the mortgages issued during the housing boom required little or no downpayment. They also have adjustable rates primed to go up sharply and rely for their repayment on continued hefty increases in housing prices — which have not materialized — rather than on the borrowers’ income.

The 2005 bankruptcy reform should have recognized the riskiness of today’s mortgages by eliminating the outdated lender protection. But during the reform effort, fairness took a back seat to a baser aim — simply, to make it more difficult for consumers to gain a fresh start through bankruptcy. The result is that lenders who abandoned caution during the housing boom are protected while the law gives no aid to borrowers who were enticed, and at times deceived, into risky mortgages.

The law’s perverse nature is even more evident if you read the fine print: The prohibition on modifying mortgage debt applies only to primary homes. Borrowers wealthy enough to own more than one home can restructure the debt on second or even third homes.

Before foreclosures climb any higher, Congress must reform the bankruptcy law. Legislators should reject the special protection for mortgage lenders by putting mortgages on the same footing as other secured debt. Doing so would help restore consumer bankruptcy to its purpose — to provide a safety net for borrowers who can’t repay their debts for reasons beyond their control.

Reply by Julie Williams on 7/14/07 10:52pm
Msg #199957

Damned if they do; damned if they don't

Those big bad lenders!!!

Let's recap, 30 years ago, borrowers had to have ample down payments and the lender gave them an uncompliated loan with a fixed rate. Drats! You mean you need to SAVE $$$ for a down payment, 20 percent you say, well that sounds like descrimination to me! (PS my parents only had a Sears charge plate--no credit card debt and no FICO score. I can't imagine the hell and torture my parents went through by renting for a few years after they were married to save for the down payment. What a racket, I know only the weathy can have home ownership!!!

Fast foward, lenders give loans with no downpayment required so this way everyone can own a home. To furnish that home, you can now get instant credit at the furniture store, because why should you have to wait for anything today? Those rotten banks. They give the borrower money to buy the American dream, some giving them a fixed rate so they have 2 to 5 years to increase their income and improve their credit scores, but when that doesn't happen, shame on the bank for wanting to get paid.

Show me where those enticed and deceived borrowers had an attorney reveiw their paperwork--stop blaming the bank!!!!!

Reply by Dennis D Broadbooks on 7/15/07 7:09am
Msg #199972

Personal Responsibility? Savings? Patience?

What novel concepts, Julie. What will you think of next?

Reply by Hugh Nations Signing Agents of Austin on 7/15/07 4:33pm
Msg #200005

Re: Damned if they do; damned if they don't

Julie Williams of MI sez of the attitude that predatory lenders might bear some responsibility for the coming deluge of home foreclosures:

***stop blaming the bank!!!!!***

Julie, are those the same banks and bankers that I helped out with a taxpayer financed $500 BILLION bailout a few years ago -- a bailout that will continue to dwarf any relief that stricken homeowners are likely to receive?

Reply by Bob_Chicago on 7/15/07 10:29pm
Msg #200024

The act is more commonly known as the "Bankers and

credit card compnay relief Act of 2005"
It treats alike bot the yuppie who deliberatlly ran up his bills to
enjoy the good life; and the poor schulb who kept trying to feed his wife
and kids when he got sick after he
lost both his health insurance and his employment after his good manufacturing
job got shipped to Indonesia so that some mult-national could make itself
a better target for a merger or hedge fund privitazation.