Asian Journal- The Filipino-American Community Newspaper

Sunday
Nov 22nd
Text size
  • Increase font size
  • Default font size
  • Decrease font size
This site is best viewed with Firefox 3, Safari 3 and Internet Explorer 7
Home General Interest Atty. Raymond Bulaon Proposed law for “forced” loan modification?

Proposed law for “forced” loan modification?

E-mail Print PDF
(0 votes, average: 0 out of 5)
Article Index
Proposed law for “forced” loan modification?
Page 2
All Pages

According to recent statistics, there were more than 3 million foreclosure filings in 2008. One in 54 homes received at least one foreclosure notice during the year. Our policymakers in Washington are scrambling for a solution to help troubled homeowners. When will relief be available?

As foreclosures increase, some homeowners are trying to take advantage of falling interest rates in order to lower their mortgage payments. According to the Mortgage Bankers Association, 85 percent of all mortgage applications are now for refinancing. The average interest rate for a fixedrate mortgage for 30 years is approximately 4.75 to 5 percent. The problem with refinancing for most people, of course, is the obvious fact that property values have declined significantly, and most properties have either zero or negative equity. Thus, a lot of homeowners are stuck with mortgage payments that they can no longer afford. As a result, homeowners are now looking at loan modification as their only other option.

Voluntary efforts by lenders to modify mortgages have somewhat helped to slow down the pace of foreclosures but, in my opinion, are still not enough. A lot of these lenders are unable to cope with the high volume of defaulted loans and their loss mitigation or loan workout departments are understaffed. This has made it difficult for homeowners to communicate with their lender in finding a resolution. Most lenders will not even discuss loan modification unless the homeowner is already behind on payments. Thus, a lot of homeowners are intentionally defaulting just to get their lender’s attention. I know it doesn’t make sense, but that is exactly what is happening these days.

This week, the Senate will debate its version of the stimulus and recovery package which includes a measure that will allow bankrupt homeowners have their mortgages modified under court protection. But expect some delays. It seems like the Senate leaders and the Obama administration cannot agree on whether the measure should be part of the overall stimulus and recovery package or if it should be considered under separate legislation. They are afraid that including the foreclosure relief measure in the bill will cause the Republicans to either delay or reject the entire package. There is no doubt that the need for foreclosure relief is urgent but passing actual legislation that the lawmakers can agree on is not as easy as it sounds.

Under the proposed measure, bankruptcy judges will be allowed under Chapter 13 bankruptcy to reduce the mortgage balance on the debtor’s principal residence if the property has negative equity (Chapter 13 is the type of bankruptcy for individuals with regular income who can at least pay some of their debts). So let’s say you owe $500,000 on your primary residence and your property is only now worth $350,000. In this case, the judge can reduce the loan balance to $350,000. The difference of $150,000 becomes an unsecured debt to the lender and can be paid off, most likely for pennies on the dollar, at the end of the case. This process is known as a "strip down." The judge can also erase periodic rate adjustments, prepayment fees, balloon payments, etc. and all other terms of the original loan that make so many mortgages toxic for a lot of homeowners. (Currently, a "strip down" may be possible with a wholly unsecured junior trust deed—let’s say a second mortgage on your residence but you cannot do it with the first mortgage on your property. The proposed bill, if passed, will allow you to do this.)



Comments
Add New Search RSS
+/-
Write comment
Name:
Email:
 
Title:
UBBCode:
[b] [i] [u] [url] [quote] [code] [img] 
 
 
:angry::0:confused::cheer:B):evil::silly::dry::lol::kiss::D:pinch:
:(:shock::X:side::):P:unsure::woohoo::huh::whistle:;):s
:!::?::idea::arrow:
 
Please input the anti-spam code that you can read in the image.
Powered by AJPress

3.26 Copyright (C) 2008 Compojoom.com / Copyright (C) 2007 Alain Georgette / Copyright (C) 2006 Frantisek Hliva. All rights reserved."

 
Should employees file their own wage claims?
Q: I work 10 to 12 hours a day but my employer pays me a fixed salary of $1,500 a month. Am I entitled to overtime payment for work done beyond 8...
What should I do if my boss violates the law? (Protecting the Whistleblower) Part 2 of 2
In the previous issue we discussed an employee’s right to refuse an employer’s instruction to perform work that violates the law. If the employer...
Deferring Gratification
"… So many of us define ourselves by what we have, what we wear, what kind of house we live in and what kind of car we drive … If you think of...
New bankruptcy law to make mortgage modification easier
THERE may be some good news for struggling homeowners facing foreclosure. A few days ago, Senator Dick Durbin introduced new legislation in Congress...
A case for coming home … for a visit, that is
(Part 2 of 2)(A current radio promotion by The WAVE, which gives away trips as prizes to its listeners jogged my memory of a Philippine visit, just...
Saving for College
SINCE State Farm* has entered the field of financial services, I’m talking with more families about planning for the future. While families almost...
Don’t outlive your income
What would you say about an insurance policy that claims to provide guaranteed income for the rest of your life or a specific period of time?...
safety: Back to schoolfore
IT WON’T be long before school starts again. Kids will be out in greater numbers on the streets and sidewalks. As parents, we want our children to...
Obama Plan Supports Mortgage Modification
I JUST heard on the news today that President Obama has unveiled a large scale mortgage modification and home lending plan designed to reduce the...
Debt settlement scams: More things you need to know
LAST week, I wrote an article about how many consumers become victims of debt settlement scams. I think this struck a chord with a lot of readers and...
Season’s Greetings from your beauty experts!
Onbehalf of the beauty experts at Monet Salon Las Vegas, may I greet all of you a merry, merry Christmas! From all the news we’ve been hearing , it...
The meaning of the holidays
ALL year round we work hard and try to fulfill our duties and obligations the best that we know how. Sometimes, we get caught in the tasks and forget...
Feng Shui Case Study – Headaches in the Bedroom
MARY AND HER HUSBAND Mark live in a house set on top of a small hill in Glendale. Mary belongs to the water element and is an Eastern Direction...
The beauty of forgiveness according to Dr. Vicki Belo
By the time this column comes out, we’re busy putting the finishing touches and celebrating the first Beautiful Life! Event|Ruffa’s Birthday Bash...
Will you be covered after you retire?
The life insurance coverage provided by your employer is one of the many benefits you may not think about on a regular basis. As long as you are...
Guardian animals and the power of symbols
THE next few articles in my column are dedicated to a fascinating and vital aspect of feng shui we call "guardian animals." As a child, I dreamt a...
Rewriting your own story
"A useless life is an early death." — GoetheIF you’ve been given the chance to restart a new life after you’ve gone through some life-changing,...

FASO-PASKO

Click Here 

Balikbayan Magazine Issue 9 Vol. 1 November

AJTV