Obama Backs Modification of Mortgages in Bankruptcy

[simon2020]

But the fight will be fierce with the "Mortgage Bankers Association" who do not want this new bill to be passed.

I think with all the bankers out there who are pan-handling the government for more $$$$ for their pockets, the little people (us!) should have the option for our bankruptcy judge to modify our mortgages.

What do you think about their fight against Obama and friends in D.C.?

Source: OBAMA BACKS MODIFICATION

[Never_Again]

This may not put me very popular here, but I do not think that a judge should have the right to modify the terms of a secured loan like a mortgage. That is why they are secured.

Just my opinion, and I am sure that others will share theirs.

[jktrading]

Why do you have the right to have your mortgage "modified?" Were you forced at gunpoint to sign the contract? Sorry, I do not think a modification is in order. You signed the deal, live with it, or get a better rate by refinancing. No disrespect intended, only an opinion.

[chloe0724]

You also signed a contract for your car too, but the judge has the ability to modify that loan for you.

[keepmine]

A refi isn't going to help if you're $50K or more upside down in the mortgage.
The way the bill is presently structured, it will only affect subprime or nontraditional mortgages.
I think it may help put some sort of bottom in the housing market if some homes that would be foreclosed anyway and sold at a price well below the loan payoff have mortgages modified so the present owners could keep living their as oppsed to a venture capitalist getting the deal of a lifetime.
As to the question should a judge have this authority. The car analogy is a bad one. Cars depreciate anyway but at the end of 36-60 months or so, they're paid off with some sort of residual value. Not like a house where you're dealing with a 6 figure amount over 30 years.
But, judges can strip a junior lein in a Chapter 13 proceeding under certain circumstances that many here have used. I don't think it's that much of a stretch to give the judge the authority to modify a bad loan to something workable. After all, a bank isn't gonna take a loss anyway you slice it-may as well let the little guy catch a break.

[kenshirley]

I have to agree that allowing a judge to make major modifications to a long term loan could put the country in more trouble.
Car loans? I thought you either reaffirmed and kept the contract or turned the car in?? Or you made an offer for lessor value which had to be very short term financing.

[keepmine]

I have to agree that allowing a judge to make major modifications to a long term loan could put the country in more trouble.
Car loans? I thought you either reaffirmed and kept the contract or turned the car in?? Or you made an offer for lessor value which had to be very short term financing.

In a Chapter 13, if you've owned the car for 910 days the judge can modify the loan to the FMV.

[BillyRip]

Why do you have the right to have your mortgage "modified?" Were you forced at gunpoint to sign the contract? Sorry, I do not think a modification is in order. You signed the deal, live with it, or get a better rate by refinancing. No disrespect intended, only an opinion.

You signed a contract with the credit card companies too.

[HHM]

Whether it makes sense in the larger context of the economy is questionable, but within the logical consistency of the bankruptcy code, judges should be allowed to do this.

When you file BK, you are essentially telling your creditors this.

"Here is everything I have, here is what it is worth, and here is the money I make. That is all I have, so here is what you are going to get."

Thus, if the house really has negative equity, then the lender is only secured up to the value of the house at the time the BK is filed. Thus, if the loan principal exceeds that value, the BK court should be able to write down the principal and convert it to an unsecured debt. The lender should bear some of the risk of the real estate market.

Within the context of the BK code and the intent of BK, it is logically inconsistent to NOT allow debtors to bifricate secured debt into its secured and unsecured portions and revalue the liens.