Bankruptcy Loan Modification Bill Recipe Incomplete

Discussion in 'Congress' started by JimofPennsylvan, Feb 25, 2009.

  1. JimofPennsylvan

    JimofPennsylvan VIP Member

    Jun 6, 2007
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    I would like to ask the leadership of the U.S. Senate and the U.S. House of Representatives, Do you believe that ordinary Americans have the right to know what bills your respective chambers are planning to debate and vote on in a timely manner so they can exercise their civil rights which they hold as citizens of America which is a "democratic country" by the way? If you do the way you run your chamber surely does not reflect it! Finding bill numbers and titles and "debate and voting" dates is often like solving a puzzle. If you would be interested in running a legislative body in a manner consistent with democratic principles in this high technological age you should at minimum have the "Daily Digest" posted on your internet web-site no later than one hour after the close of business (not the next day) and re-vamp your calendar web-site page so that it contains for each day every bill number and that bill's description that will be debated on or voted on that day so that the same day this information is disclosed to rank and file members of your chamber the information will be provided clearly to the public on this calendar page, it would be considered having your deeds match your talk about being committed to "Democracy".

    On HR 200 the "Bankruptcy Home Loan Modification" bill at least the majority if not the vast majority of experts believe that the principles behind the bill are correct. Giving Bankruptcy Judges the power to modify home loans in a reasonable manner is the right thing to do because it will cut down on the flood of home foreclosures which is driving down home prices and massively hurting the new home construction industry, a big jobs generator for the nation.

    One point on the House bill that seems rather to indicate that the House isn't trying to work with all the major parties on this issue here is the language in the bill on provisions for Truth in Lending Act violations. Leading Democrat Senators very wisely lead the nation to believe that they would acquiesce to the Lending Industries request that the legislation only affect lender's interest for "major" violations of the Truth in Lending Act because they recognized the real issue here is helping burrowers that are underwater with their mortgages or burrowers that have adjustable rate mortgages where the interest rate has risen significantly higher than the prevailing fixed rate mortgage rate and is unaffordable for the burrower. The House bill has provisions that will result in a lender's interest being negatively affected for any technical violation of the Truth in Lending Act - not to belabor the complication this will cause to bankruptcy cases the House's behavior here does not rise to the level of their aforementioned prudent Senate brethren, the House should do some reconsideration here.

    The White House and the Congress have made their plan relatively clear with their home loan modification initiative here. They will use the Bankruptcy cramdown law as a stick to drive lenders to accept their carrot in their $75 billion incentive initiative to get lenders to modify home loans so that Americans can afford these loans and not lose their home through default and foreclosure. But there is one piece of the problem that the White House and the Congress have not adequately addressed. Many loan servicers (or mortgage servicers) are contractually obligated not to reduce principal and some not to reduce interest rates on the loans in question. To put it another way these loan servicers don't want to get sued and face large legal liabilities if they do the loan modifications the U.S. government wants here. These legal impairments on loan servicers have and will block loan servicers from modifying home loan in a good and needed manner.

    If Congress is smart in this HR 200 legislation they will address this loan servicers contractual obligation problem. If Congress wants to be extraordinarily courageous, just in this legislation give the loan servicers for a three year period the same power the bankruptcy judges will have to modify home loans. In other words, the loan servicers would be free by law from all legal liabilities, from owners of home loans they service, in modifying home loans for the next three years as long as the modifications fall within the same limits of bankruptcy judges modifications, that is, principle can be reduced to the market value of the property and the interest rate can be reduced to the current fixed rate interest rate. The three year limit of authority should be compelling because it lets banks, investors and owners of loans know that this is just a one time deal the government isn't permanently changing the system it is just to get the nation over this housing/credit crisis and recession. The limits on loans servicers powers to modify loans should also be compelling because it is no more power than the bankruptcy judge will have so that from a loan owners perspective the loan owner isn't really losing much the law is already allowing loan owners interests to be negatively affected by a bankruptcy court modification this loan servicer twist in a worst case scenario will just result in it being done at a sooner date.

    Congress in HR 200 could address the problem in another way. They could mandate in the legislation that every loan servicer that has a loan where the burrower is struggling contact the loan owner in writing asking for the loan owner's consent to allow the loan servicer to modify a home loan like a bankruptcy judge could if the loan servicer deems it appropriate. If the loan owner consents than the loan servicers has the needed power to modify the loan if it doesn't respond in writing within thirty days the loans servicer is deemed by law to have the loan owners consent to modify the loan. For loans that were bundled up and sold as securities, the law would require the loan servicer to contact all security owners it can locate and as long as over fifty percent of the security owners for the all the securities that rise out of the bundle of mortgages in which the mortgage in question is a part of than the loan servicer of that mortgage loan is deemed to have consent. The legislation will make it clear once the loan servicer has consent to modify a loan it is servicing it cannot be sued over the matter, no state or federal court will have jurisdiction to hear such a case - the case won't even be permitted to be filed.

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