Tomorrow (February 26) the House will vote on HR 1106, a housing package that includes the judicial modification provision of HR 200. That provision would let homeowners turn to the bankruptcy courts to allow them to modify the mortgages securing their principal residence. Currently, bankruptcy provides no remedy for homeowners who are trying to save their home from foreclosure.
While there are a number of complicated issues affecting our economy, the housing crisis continues to devolve. The Washington Times reports that there is no relief in sight from foreclosures and the falling home values that help fueling it. We can encourage Congress to do nothing, while the economy continues a downward spiral. Or we can tell them to pass this bill and give homeowners the chance they deserve in bankruptcy.
House approval is not guaranteed. The American Banks Association and the Financial Services Roundtable have sent letters to house leaders urging that the bankruptcy modification provisions be removed from the “Helping Families Save Their Homes Act of 2009.” The “buzz” I am hearing is that the lender lobbyists are showing up in “packs” in Member offices urging opposition to the judicial loan modification proposals. “Packs.” What the hell are they so scared of that they have to travel in packs? According to a report from CNN, two-thirds of mortgage servicers have agreed to the foreclosure mitigation plan outlined by the Secretary of the Treasury.
[T]he prospect of a law amending the bankruptcy code to allow judges to dictate new terms on mortgages in the event of an individual filing bankruptcy, was also likely a significant factor in the companies’ willingness to cooperate with the administration’s plans.
The House is working on legislation which would be aimed at helping people in bankruptcy to hang on to their primary residences. It could see bankruptcy judges compelling mortgage-servicing companies to accept new terms on an individual’s mortgage.
Other than Citigroup, other large banks remain opposed to the bankruptcy-law change, arguing that it would lead to borrowers to seek bankruptcy at the first sign of trouble, rather than consider other options that might be more costly.
I don’t buy that – mainly because when I meet with clients, they are the first to tell me that filing bankruptcy is the last thing they wanted to do. So to the lenders and their servicers, I say this: if the remaining one-third of you do not want bankruptcy judges modifying their loans, modify the loans so that the homeowner doesn’t have to file bankruptcy. And for those two-thirds who have expressed a willingness to modify the loans, do it. Let’s cut the crap and just do it.
Will it increase bankruptcy filings? The Congressional Budget Office says yes. But they also say that more than 1 million homeowners facing foreclosure could benefit from this legislation. I view that as 1 million less people who will lose their home if this bill fails. These people are our neighbors, our friends and our colleagues.
So what can you do? Contact your member of Congress by phone or fax.
Email your friends and family. Ask them to contact their congressional representative by phone or fax.
What do you tell them? Try something like this:
We cannot end the financial crisis without stemming the rising tide of foreclosures. Court-supervised loan modification is an essential component of an effective and comprehensive plan to meet that challenge. And unlike every other solution being considered in Washington, it comes at no cost to U.S. taxpayers.
If we are successful tomorrow, we move over to the Senate. If we are not, that is it. No second chance. So please don’t wait. Support HR 1106.
And if you do not support it, I’ll remember. I’ll remember it when my friend loses her home because she lost her job. I’ll remember it when my house value plummets because the home next door is vacant and abandoned because the previous owner could not afford the payments. I’ll remember it on election day.
Ok, so maybe that last bit is a little over the top, but you get my point. It really is now or never. And Congress really needs to know this now.
For more thoughts, check out Real Clear Politics: Let Bankruptcy Courts Change Mortgages
Previous posts on the subject:
The President’s “Plan”
Mortgage Modification Legislation Update: Citigroup Supports the Bill
Keep the Bankruptcy Option On the Table
Changing Chapter 13: Some Facts on the Pandora’s Box
Mortgage Modification Update: Not So Hopeful
I’m pleased to announce the soon-to-be published consumer bankruptcy manual: Chapter 13 in 13 Chapters. The manual is available exclusively through the American Bankruptcy Institute. Pre-publication orders are being accepted now.
2009: Perchance to Dream
New Years is a time when many make resolutions. Some resolve to quit smoking. Some resolve to lose weight. The list of resolutions is endless. Personally, I think many resolutions are pretty useless. I didn’t stop smoking because of a resolution (but I did quit… a few Novembers ago), and I have not exactly kept up with resolution diets. I’ve been racking my brain trying to come up with something appropriate to write about for New Years. The last thing I want to do, especially today, is sound trite. It’s not like you can simply “resolve” to get out of bad mortgage or you can “resolve” to get a better job when companies are laying off. But then yesterday, I had a surprise visit from an old client who helped my thought process move along.
My client went through a long chapter 13. At times, it was not particularly pleasant. But all plan payments were paid and the discharge was received a few years ago. Now, she’s dedicated to her business and determined to keep make it grow in a difficult economy.
During our brief meeting, I noticed something different. Was it the hair color, I thought? No. Did she have her teeth done? No, not that. Then it dawned on me. It was something more.
She was happy. She was smiling. While she was not a particularly unhappy person while the case was open, I think it’s fair to say the chapter 13 was not a particularly happy period in her life. But now, the chapter 13 case is behind her and yesterday she sat before me smiling, happy, and talking about the future.
As an attorney, while I try to get my client’s perspective, I really can only get so much. I can only put myself so far into a client’s shoes. So I asked her, now that her case is behind her, now that she is moving forward with her life in new directions, what were her feelings about the bankruptcy process now that she was “on the other side of it.”
She didn’t hesitate with her response. (I can’t quote, but I did take a few notes.) She told me that going through that difficult process allowed her to dream again. That now she could dream and that making those dreams a reality again seemed possible. Her dreams were no longer mired down in a chaos created by debt that had spiraled out of control. She told me that she felt freer than she had felt in a very long time.
The minute these words flowed, I could feel a smile growing on my face….and a bit of a lump in my throat. And then, it dawned on me: ‘this is what I’ve been itching to write about for the New Year.’
Many are looking at 2009 with a sense of foreboding and trepidation. World events are not exactly fueling optimism about the future. Perhaps 2009 will not be a year when dreams will come true. Perhaps things may get worse.
Or perhaps in spite of that, you can find a way to knuckle down, stand straight, bite your lower lip, bide your time, and get through a journey that brings you to the other side of it: a side where you can dream once again. I know it may all sound silly, but I know this place exists. Yesterday, I was fortunate to be reminded that for my clients in or facing bankruptcy, there can be a life afterwards. And that life can be wonderous. The only assurance I can give you is that the big smile on my client’s face proves that anything is possible.
With that, I wish you all a very Happy New Year.
Tags: Chapter 13, Chapter 7, Commentary, Life After Bankruptcy
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