Bankruptcy Judge Loan Modification Plan Hits Wall in Senate

The bankruptcy bill, sponsored by Sen. Richard Durbin (D-Ill.), permits bankruptcy judges to reduce, or “cramdown,” homeowners’ mortgage payments to help borrowers stay in their homes — an option currently available to save vacation homes, yachts and almost any other valuable asset, but not primary homes. The House passed a similar bill in March, but it’s been stalled in the upper chamber while Durbin and other Senate leaders tried for weeks to negotiate the support of the giants of the finance industry, including Bank of America, Wells Fargo, JP Morgan Chase and the Credit Union National Association.

A central element of the Democrats’ strategy to stabilize the economy — empowering homeowners to prevent foreclosures through bankruptcy — has hit a wall in the Senate, where fierce opposition from the finance industry is threatening to kill the proposal this week. Read more

2nd loan modifications and the OBAMA PLAN

Well today the news broke about President Obama ‘s new new stimulus plan, or as they put it his “expansion” to the foreclosure prevention program.  Previously the President and all the supporting cast lined up to explain how with $75 billion, the housing crisis could be solved.  Lenders would modify loans in mass and borrowers would finally get the relief they need.  Fast-forward a couple months and now we are seeing lenders continuing their reluctance with a few bright spot exceptions.
 
The “expansion” deals with second mortgages.  The lenders prompted by the first go round had a valid point.  “Why should we modify our loan, when the 2nd gets to sit back and collect their full payment, often at a higher interest rate.”  This argument won favor with Washington, and now the President is doing the following: Read more