Chapter 7 debtors who have debt that is secured by property have a number of options, and among them is reaffirmation. A simple way of describing it: when a debtor reaffirms a debt, they are removing the debt from the bankruptcy and are agreeing to pay it. Such agreements – to be enforceable – must be reduced to writing and approved by the Bankruptcy Court. But since 2005, when Congress amended the Bankruptcy Code, attorneys who represent chapter 7 debtors have been struggling with a dual rule: that of attorney and counselor, and that of judge.
Posts Tagged ‘mortgages’
Truth and Consequences: The Bankruptcy Debate Continues
Tuesday, January 29th, 2008
The Mortgage Bankers Association which represents the real estate finance industry is apparently not pleased with a report by the Center for Responsible Lending which urges reforms to the US Bankruptcy Code. According to David Kittle, the Chairman Elect of the MBA:
Policymakers should ignore this report as it is more rhetoric than fact. Bankruptcy reform is not the answer for consumers having trouble making their mortgage payments. It will drive up the cost of credit in the form of higher rates, larger down payments and greater closing costs.
Further, bankruptcy is a logistical and financial nightmare for consumers. Filing for bankruptcy is expensive and approximately two-thirds of all bankruptcy plans fail. Nobody should be holding it out as a better alternative to working with your lender to try to find a mutually agreeable resolution.
But the CRL is responding with a report that shows that voluntary loan modification fall short. You’ll find a link to the PDF report, and the statistics here.
As for Kittle’s comments, I have no idea where the uncited reference to “two-thirds of all bankruptcy plans fail.” Where does that factoid come from? There are lots of reasons why bankruptcy cases fail, but there is no magical statistic that I am aware of. That’s flat-out misleading. And as for a “nightmare”, oh come on now. While none of my clients want to be in bankruptcy, they would rather keep their home and put food on the table, than live with the proposed “resolutions” offered by their lender.
And unfortunately, for Mr. Kittle, the sad news is that for an increasing number of homeowners, filing bankruptcy is the better alternative to working “with your lender.” The fact is, some lenders are unwilling (or for their own reasons unable) to “work” with a homeowner. When there can be no “mutually agreeable resolution”, bankruptcy is the better alternative. And until lenders start getting serious about modifications, and about their lending practices that got the country into this mess, that alternative will only appear better and better.
Some ‘Provocative’ Questions about ‘Extend and Pretend’
I read this today on HousingWire. Its publisher, Paul Jackson, poses the following “provocative” question about all of those modification plans and programs we keep hearing about (and I often write about):
Or, perhaps it can be said like this: what if consumer confidence statistics are actually being artificially buoyed by the extra cash homeowners (at homeowners ‘on paper’) who are not making mortgage payments, but instead, allocating those resources to things they would not otherwise purchase? (more…)
Tags: Commentary, Economy, HAFA, HAMP, modification, Modifications and Workouts, mortgage, Mortgage and Foreclosure, mortgages, Mortgages and Foreclosures
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