Saturday, September 20, 2008
Efforts for New Chapter 13 Mortgage Modification Laws
It is reported today in the media that there are efforts to include provisions to help American homeowners in the $700 billion bank bailout package. One of these measures would be to include changes to the Chapter 13 bankruptcy laws to allow modification of mortgages on principal residences. Presently Chapter 13 generally prohibits the modification of a mortgage secured only by a principal residence although a wholly "underwater" second mortgage may be modified and avoided. Consumer groups are reported to be in touch with congressional staff about including this provision in the Wall Street bailout package and apparently some Congressional leaders are interested.
It is reported that the federal government will purchase the mortgages and mortgage related securities at a deep discount -- perhaps up to 50% off. The media reports though that the mechanics of the purchases is not clear. CNN reports today that both Presidential candidates are in favor of amending the bankruptcy code to allow for this modification of home mortgages.
With the home mortgage situation continuing to deteriorate and with the Presidential election soon approaching, it just might be the political climate where Congress will take action.