How Do You Spell Mortgage Relief? How About B-A-N-K-R-U-P-T-C-Y


Mortgage Relief + Congress = Bankruptcy Court

Looks like the ever expanding home mortgage crisis will be headed to courtrooms after all.

Democrats in the House have apparently come to terms on legislation that would give bankruptcy judges authority to rewrite mortgages provided borrowers could prove that they had tried without success to secure better terms with their lenders.

It is this condition that apparently allowed some otherwise reluctant congresspeople to sign on the dotted line.

The full House may vote Thursday.

What remains unclear is whether this legislation would apply even to those whose mortgages were long ago sold off to God knows how many investors?

The A.P. quotes House Majority Leader Steny Hoyer as saying, “The concern is that we want to ensure that those people who get relief have tried other avenues.”

But already some critics are crying foul. They argue that lenders are difficult to deal with as is…so how receptive are they likely to be to pleas for lower rates?

While this is playing out…and this is not a done deal by any measure, in San Diego, something strange is going on!

Reportedly, more and more banks have simply stopped foreclosure proceedings….they are down considerably from only months ago.

Is the housing market recovering under the San Diego sun?

Apparently not.

The slow down in bank foreclosures appears to be the result of lending institutions taking a deep breath while waiting to see what goodies might come their way courtesy of the Obama administration.

Photo Credit: Daniel Leininger

About Author

Charles is currently reporting for KNX Radio in Los Angeles, is the co-author of the book No Time To Think, and can be found commenting about the news on his blog, The Feldman Blog, as well as on The Huffington Post.


  1. Charles and others,
    I’ve been doing some reading about the pending changes in bankruptcy judicial powers, basically looking into the judges ability to change mortgage terms.
    While I understand the political hay this will make for those law makers backing it, I think it will be a disaster in the short and long run.
    Sure, Joe Homeowner who owes $100k on a house now worth $85k, and paying 9% interest will be happy to get a new balance at $85k, and only pay 5% interest.
    Who loses there? The lender? that’s not a big deal, after all, mortgage lenders are large institutions and they caused this mess anyway, right?
    Why allow them to expect the loan to perform as written and make an unconscionable(sp?) profit?

    Thing is, what if…..and this is what scares me personally.
    Same Joe Homeowner situation, house worth $85k now, $100k at 8% owed against it by Joe.
    Thing is, this house was sold by Bob Investor, who carried a mortgage, and wrapped it around an existing mortgage he had when he bought the place.
    What happens when Joe Homeowner goes to BK court, and the judge lowers his loan balance to $85k, and drops the rate to 5%, when Bob, the investor who holds that paper, has a loan for $80k against the house, under Joe’s, and is paying 7.5%?

    Then who loses?
    Sure, some will say, “but these changes were meant to deal with institutional lenders and their loans?”
    will this be clarified?
    What if the investor sells houses, holds paper, and does so under a corp, or LLC, is he now an ‘institution’, and held to the same standard.

    What happened to, you agreed to pay or give up the collateral, so do one or the other?

    Anyway, my thoughts, anyone else thinking along the same lines?

    a/k/a The Biker Who Buys Houses
    My Blog:

    BikerJim’s last blog post: Just a random post

  2. lance shutter on

    The banks (government) are really missing the mark. The majority of homes are owned by people who do not have credit scores at or above 750. The majority are in the reality zone of between 600 and 750 including those in foreclosure. Solid bill paying people who for reasons most of us recignize missed a credit card payment or were late once or twice. And since there is no remedy once it occurs they are not able to refi at a workable rate. This should be the focus not those that over bought or tried to cash in (or out). That and fixing usuary laws on credit cards is the solution.

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