Mortgage Rate News

In an ongoing effort to strike compromises with the GOP minority, the Democrats are rethinking the measure in the mortgage relief bill that allows bankruptcy judges to modify the terms of home mortgage loans. Although, this compromise is probably for the best.

Bankruptcy mortgage loan modification as a last resort

Rather than giving carte blanche to bankruptcy judges to impose changes to mortgage loans terms — from interest rates to payments to principal — the Democrats are conceding that bankruptcy help with loan modification should be a last resort. Indeed, the new language in the mortgage relief bill would require home owners to show that they have made efforts beyond bankruptcy to modify their mortgages, reports Stock Market Funding:

“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. Borrowers also would have a responsibility to prove that they tried to modify their mortgages with their lenders before seeking help in bankruptcy court. Rep. Zoe Lofgren, D-Calif., one of the centrist negotiators on the bill, said homeowners in fear of losing their homes would have to show that they provided their financial documents to their lenders, “not just a phone call to an answering machine.”

This is probably the best compromise that could be reached. Mortgage lenders need to be spurred into actually trying to help prevent foreclosure through loan modification. In many cases, mortgage lenders aren’t even working with those who would be able to finish paying out on a modified mortgage. They just aren’t willing to deal. Take taxpayer bailout money, yes, but actually helping taxpayers, not so much.

I have a feeling that when this goes through, combined with the incentives in the foreclosure prevention plan outlined by the President, mortgage lenders might take a look at some of the over reactions, and perhaps some foreclosures might be prevented. Of course, for some folks, no amount of loan modification can help and they will lose their homes regardless.

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