BANKS WON'T COOPERATE AND HELP HOME BUYERS?? THERE IS AN ALTERNATIVE.

REAL ESTATE AGENTS GOES FAR AND ABOVE THE LINE OF DUTY.  Midori Miller gets a reprieve for a home owner facing foreclosure.   REALTOR Goes To Court And Gives Judge Thumbs UP!

FULL DISCLOSURE:  In a past life, I worked with the U.S. Trustees Office of the Dept. of Justice.  We conducted Chapter 7 Sec. 341 hearings and .. . .  more.  However, the bankruptcy law changed significantly in 2005 making it more difficult to liquidate.  I'm a tad behind but I understand the proposed modification of the code to give bankruptcy judges ability to modify mortgages. 

Inspired by Midori Miller's post today where she performed the Herculean task of postponing a foreclosure, perhaps agents can work towards getting more relief for home owners with negative equity in a Court of Law than working with foreclosing banks.  Midori's experience was a lot more positive than usually found in dealing with a mortgage company. 

I have always believed that the consumer, particular a consumer who, through no fault of their own, which I believe to be the case with most home owners who have negative equity, would fare far better in Bankruptcy Court than trying to work with a mortgage company.  The reasons are simple:

• Bankruptcy Judges have no monetary interest in the case.
• Bankruptcy Courts are designed to give "relief" to debtors in financial trouble.
• A Court of Law doesn't have to "negotiate" with a lender with a vested interest.
• A Court of Law can require a lender to respond to an ORDER OF THE COURT.

THE ARTICLE BELOW IN THE WALL STREET JOURNAL SUMS UP THE RELIEF.

Federal bankruptcy judges say they are eager to have the power to restructure mortgages for struggling debtors because it could save hundreds of thousands of homeowners from foreclosure.  Wall Street Journal.

The legislation, which is being advanced by top Senate Democrats, would let judges set new repayment terms for mortgage holders in bankruptcy court. Lawmakers say the measure is aimed at jump-starting broader efforts to renegotiate millions of underwater mortgages now weighing down the housing market. Wall street Journal.

IT COULDN'T BE ANY WORSE THAN IT ISfor the consumer than the present day structure of mortgage modification which is practically non-existent.  Mortgage companies are dictatorial, arbitrary, non-responsive and ANSWER TO NO ONE.

ALTERNATIVES:

FORECLOSURE:  Homeonwer's credit is ruined for about 5 years and they can be demanded to pay a deficiency.  The home owner has already LOST THEIR HOME.  Consumer will have to rebuild credit before buying a home. 

MORTGAGE MODIFICATION WITH LENDER:  Lender may agree to add arrears to balance, may lower interest rate.  However, the principal loan remains far lower than market value.  Credit is ruined for years due to delinquencies.   Consumer is still UPSIDE DOWN on mortgage and can't sell even in an emergency.

BANKRUPTCY:  Judge may modify the mortgage balance to market value or a % of owner's income.  This lowers the payment and the owner has no negative equity.  Consumer can qualify for new mortgage loans in 2-3 years with VA or FHA or 4 years with conventional.   Consumer would be in a position to sell since they wouldn't be held hostage to negative equity.

IF RELIEF WERE AVAILABLE TO HOME OWNERS IN BANKRUPTCY COURT, the many scam artists that are springing up daily would have an alternative.   The banks are forcing home owners to be in arrears with their mortgage now before even seeking a short sale or any modification.  If a consumer's credit is going to be ruined for years, they might as well get their mortgage modified to a manageable mortgage balance with some relationship to market value. 

I believe that the likelihood of this legislation passing is about 15-25%, but hope springs eternal.

              

                                   "Did the bank ever return your phone call Honey?"

                          "No Dear, they are going to foreclose, but I have another idea."