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New Law Could Help Stop Foreclosures

By
Real Estate Agent with J. Rockcliff Realtors (#01723588)

Democrats have wasted no time in creating a new bill to change bankruptcy rules with the aim of reducing home foreclosures. Under the proposal, judges could order lenders to forgive some mortgage debt.

The measure would change the law to give homeowners filing for bankruptcy the opportunity to restructure their loans so that they can save their homes from foreclosure.

"The economic turmoil we are experiencing is a direct result of the burst housing bubble," said House Judiciary Committee Chairman John Conyers, D-Mich., who co-sponsored the bill in the House. "Foreclosure is now expected to claim more than 8 million homes by 2012 -- 16% of all mortgages in America. To set our economy on the path to recovery, we need to strengthen our communities by taking steps to stabilize the home mortgage market. Giving homeowners the chance to restructure their loans will help more families avoid foreclosure."

Lawmakers who introduced the Bankruptcy Act of 2009 argue that the effect of the anticipated stimulus package will be greatly diminished unless foreclosures can be reduced. They say it would help break the continuing cycle of foreclosure that threatens neighborhoods and cities across the country.

Rep. Linda Sanchez, said that under the current bankruptcy law, judges can restructure debt on vacation homes, yachts and private jets, but not on primary homes. "There is no reason why average Americans should not have the same legal protection to save their family homes."

Rep. Jerrold Nadler, said that under current law, home mortgages are virtually the only debts that cannot be modified in bankruptcy. The proposal, would give homeowners the same advantages corporations have when trying to restructure their debt. Voluntary efforts to modify loans have not produced the desired results.

Comments (3)

Jim Crawford
Long & Foster - Fredericksburg, VA
Jim Crawford Broker Associate Fredericksburg VA

It will mean eventually that mortage money will totally dry up...if you lend money under a signed contract and the other side does not have to honor its side of the bargain!  This is an extremely bad idea, and an end to capitalism.

Jan 08, 2009 07:55 AM
Konnie Mac McCarthy
MacNificent Properties, LLC - Cobb Island, MD
Broker/Owner - VA & MD "Time To Get A Move On!"

I like it I hope it passes..that has been the problem people who want to stay in their homes, not getting the help they need..that would be great.

Jan 08, 2009 09:13 AM
Brian Brumpton
Keller Williams Boise - Boise, ID
Boise Idaho Real Estate

The banks are unwilling to negotiate with people who are making their payment who may be in a spot of trouble.  This only promotes the attitude that to get them to do anything you have to be late.  I don't know that forcing them to restructure is necessarily the answer but you would think they would rather work something out instead of eating the entire loss.

Jan 08, 2009 09:58 AM