Congress voted that primary residences would not be allowed to be modified when they rewrote the bankruptcy laws in 1978. I wonder who swayed that decision (banks maybe)? Bankruptcy judges already have the ability to modify the terms of other debt, including car loans and even 2nd homes, to help consumers with a reasonable payment plan.
Mortgage debt, has always been treated differently than other types of debt. The threat that the bank can and will take the house if the payments are not made is designed to encourage lenders to offer lower rates on a less risky type of investment.
Bankruptcy and loan modifications have been circulating through the congress halls lately. This possible “solution” to our mortgage woes has not really been in the media since the end of last year when the U.S. House Judiciary approved a new bankruptcy bill in December that would enable homeowners to modify their mortgages in bankruptcy court. The bill, S 2636, Foreclosure Prevention Act of 2008 that has been designed to keep homeowners in their homes has had it’s share of controversy and opposition.
Previously in October, Rep. Brad Miller (D-NC) and Rep. Linda Sánchez (D-CA) introduced another Bankruptcy Bill, HR 3609, that they touted by saying, “this bill will treat home mortgages the same as mortgages on investment properties and family farms. The bill repeals a provision that prohibits a bankruptcy court from modifying a home mortgage, but allows a bankruptcy court to modify any other secured debt, including mortgages on other properties
The sponsors of the bill claim that it would help up to 600,000 people from losing their homes, but they are getting strong opposition from opponents who claim that the legislation as written would drive interest rates up for everyone seeking a home loan.
Wall Street is about to go bankrupt and our US Treasury Secretary, Henry Paulson is asking Congress and tax payers for a big fat $700 billion dollar check to bailout his friends in suits and in glass houses. It is only fair that us little guys (who are footing the bill) on Main Street, in our straw foreclosure homes, get some damn relief. It looks like their is a slim chance that homeowners may be next to get thrown a BK life jacket. It might not be as shiny, but its better than nothing!
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