Write Congress Now to Support Cramdown in Bankruptcy

[bobbyw24]

http://www.congressweb.com/cweb4/index.cfm?orgcode=nacba&hotissue=1

Easy to send fax on this link

[idiom]

Do we want to support Cramdown?

I thought Cramdown was a bleeding heart socialist idea....

[bobbyw24]

House Democrats Reach Deal on Cram-Down Mortgage Bill (Update2)


By Dawn Kopecki and Margaret Chadbourn
March 3 (Bloomberg) -- Mortgage “cram-down” legislation that stalled in Congress last week will require homeowners to exhaust all options before they could use bankruptcy to reduce their loan payments, according to a summary of the revamped bill.
The House of Representatives may vote as early as March 5 on the amended legislation, which would let federal judges lengthen loan terms, cut principal payments and reduce interest rates for borrowers in Chapter 13 bankruptcy protection, House Majority Leader Steny Hoyer, a Maryland Democrat, told reporters today.
Democratic leaders, who had pulled the bill from consideration, embraced an alternative plan pushed by the New Democrat Coalition, which calls itself a group of moderate lawmakers. The bill would require borrowers to seek loan modifications from their banks before they could qualify to amend their mortgage terms through bankruptcy protection.
“Some may think the changes made to the bill go too far while others will contend that they do not go far enough,” said a letter sent to their colleagues by three California Democrats who sponsored the changes, Representatives Zoe Lofgren, Dennis Cardoza and Ellen Tauscher. “Given the ever-deepening housing crisis, however, we ask you to place such differences aside as we have done and support this effort.”
Under the compromise, bankruptcy judges would have the discretion to decide whether banks had offered a “qualified loan modification” that would bar borrowers from cramming down their mortgage in bankruptcy, according to an e-mailed summary of changes being circulated by Democratic staff.
‘Heinous Practice’
“The banks have got to stop falling on the ball and start answering their phones,” Tauscher said in an interview last week. “We need to get these qualified loan modification programs up and running.”
Loan modification that actually raises a borrower’s monthly payments is a “heinous practice” that may not qualify as a modification under the legislation, Tauscher said. Regulators would be given discretion to define what qualifies.
Borrowers would also need to certify that they’ve provided their income, expenses and debts to the mortgage holder.
Judges would be required to use federal appraisal guidelines to calculate home values to determine whether a loan is “under water,” which is when the mortgage balance owed exceeds the property’s worth. To qualify, the loan must be unaffordable to the borrower, not just under water, according to the summary. Borrowers would also need to share a portion of the price gains with lenders if the house is sold during the bankruptcy plan, according to the summary.
‘An Added Burden’
Republicans including Representative Lamar Smith of Texas say the plan will force responsible borrowers to subsidize other people’s mistakes.
“American families and homeowners are already hard pressed with their own financial responsibilities,” Smith wrote in a letter today to Treasury Secretary Timothy Geithner. “Giving irresponsible borrowers a bankruptcy bailout at the expense of responsible homeowners is simply an added burden and another bill to pay.”
Housing and Urban Development Secretary Shaun Donovan briefed House Democrats today on how the bill fits into President Barack Obama’s broader housing plan. The administration is scheduled to release more details of its mortgage rescue plan tomorrow.
To contact the reporter on this story: Dawn Kopecki in Washington at dkopecki@bloomberg.net; Margaret Chadbourn in Washington at mchadbourn@bloomberg.net.
Last Updated: March 3, 2009 19:54 EST

[bobbyw24]

Democrats reach deal on mortgage relief bill
By JULIE HIRSCHFELD DAVIS and JIM KUHNHENN – 10 hours ago
WASHINGTON (AP) — House Democrats, under pressure from a group of moderates in their ranks and the banking lobby, agreed Tuesday to narrow legislation that gives bankruptcy judges the power to force lenders to rewrite mortgages for debt-strapped homeowners. The compromise legislation was expected to come to a vote in the House as early as Thursday.
Under the terms of the agreement, judges would have to consider whether a homeowner had been offered a reasonable deal by the bank to rework his or her home loan before deciding whether to take judicial action to lower the interest rate or principal.
Borrowers also would have a responsibility to prove that they tried to modify their mortgages with their lenders before seeking help in bankruptcy court.
"If there is modification available, you would prefer that than a bankruptcy," said Rep. Zoe Lofgren, D-Calif., one of the centrist negotiators on the bill.
Democrats said the goal was to make bankruptcy clearly a last resort for homeowners in danger of losing their homes.
"The concern is that we want to ensure that those people who get relief have tried other avenues," House Majority Leader Steny Hoyer, D-Md., said.
Mortgage lenders who mounted a costly and successful effort last year to kill the measure, which they call the "cramdown," have been lobbying intensely to restrict the bill. They argued that mortgage adjustments made in bankruptcy would raise mortgage interest rates for all consumers and create a wave of bankruptcy claims.
Their opposition helped derail the //last week, even after leading Democrats had agreed to restrict it to people who had tried other means of reworking their mortgages and those who couldn't afford their home loans.
The industry has "been giving it everything they've got," said Rep. Brad Miller, D-N.C., an architect of the legislation. "They still have remarkable influence."
Still, Miller and some other backers of the idea said they support the new plan.
"It would encourage lenders to make modifications and there would be consequences if they don't do it," Miller said.
Democrats discussed the compromise in a closed meeting Tuesday with Housing Secretary Shaun Donovan, who told them the legislation would dovetail with the administration's overall efforts to reduce foreclosures. Obama unveiled a $75 billion housing initiative two weeks ago that included a call for legislation to permit adjustments to mortgages in bankruptcy court.
Following the session, Lofgren and two other moderate Democrats — Ellen Tauscher and Dennis Cardoza of California — circulated a letter seeking support for their compromise.
"Some may think the changes made to the bill go too far while others will contend that they do not go far enough," the "Dear Colleague" letter said. "Given the ever-deepening housing crisis, however, we ask you to place such differences aside — as we have done — and support this effort."
The deal would require judges to consider whether homeowners were offered a "qualified" loan workout — defined as one that would meet Obama's goal of monthly payments equal to about one-third of a homeowner's income.
The agreement includes changes whereby bankruptcy judges would have to deny a judicial mortgage adjustment in cases where the homeowner is deemed able to afford the loan.
Lawmakers in the centrist New Democrat Coalition and the fiscally conservative Blue Dog Democrats who said they were concerned about how the measure would affect people struggling to pay their mortgages worked through the weekend to cut a deal they could support.
Some liberals said the new limits were inappropriate. Rep. Maxine Waters, D-Calif., said many mortgage companies make it impossible for homeowners to even complete a phone call to their lender, much less work out more affordable loan terms.
"I don't think people ought to have to go through that mess" to get mortgage relief in bankruptcy courts, Waters said.
She said the banking industry still has a stranglehold on Congress. "These guys rule this place," Waters said.

[Isaac Bickerstaff]

The reason for our financial mess is the fact that there is too much debt out there. The monetary system depends on bankruptcies and foreclosures to eliminate debt so that it does not implode(money created by debt). Making bankruptcies harder to get will cause the financial crisis to go on even longer, and hurt more people.
This legislation is yet more proof that congress has ZERO understanding of the principles at work here. In many cases it will not even help the people it is intended to help. If someone owes more on a house than it is worth, the only person that gains if the home buyer keeps making payments is the bank, and in many cases, the homeowner is better off financially for walking away. The banking industry's whining is just some reverse psychology to make you think that they don't want people to keep struggling under oppressive mortgages.

[Bobster]

Yeah, rewriting the terms of a contract is a great idea. If the government can come in and change contract terms down the road, then lenders will start charging more upfront to compensate for possible future losses.

[bobbyw24]

Right--brought to you by the same crowd that says the US Constitution is a "living" document.

Welcome to the "living mortgage"--it changes when your financial status changes