There may be good news for homeowners who are getting frustrated with their inability to obtain a Loan Modification. If you can’t make your payments but want to keep your house, the proposed Helping Families Save their Homes in Bankruptcy Act of 2009 may offer relief. Currently, Chapter 13 debtors are stuck with whatever terms they have for their home mortgage if they want to keep their home. This has the effect of negating most benefits of bankruptcy. The proposed amendedment to section 1322 would allow a debtor to extend the repayment period and reduce and fix the interest rate. If a debtor is in a high interest mortgage or an adujustable rate mortgage, then they could make the payments more affordable for the long term. The proposed law, however, is vague. The allowance for a “risk premium” in the fixed interest rate will not help debtor’s attorneys advise clients on what the new rate will be.
You should seek legal counsel to decide if Bankruptcy is beneficial for you.
I speculate that this will create a new standard for banks and force their hand in granting modifications outside of bankruptcy.
Filed under: Bankruptcy, Loan Modification
