Reduction of Principal might soon be happening.

[HopingtoFind]

Posted By DIANA GOLOBAY
January 28, 2009 2:34 pm



The House Judiciary Committee on Tuesday approved a measure for so-called “cram-down” provisions that would allow bankruptcy judges to change the terms of a mortgage by reducing the interest rate, extending the life or lowering the principal or loan balance as part of a bankruptcy debt restructuring plan. The bill passed the panel’s approval 21 to 15, according to a report by the Washington Post Wednesday.

The measure is headed for a full vote in the House next, before going to the Senate, and appears to be moving quickly through Congress. The version of the proposal passed by the Committee bears a few changes from the original version, notably: the cram-downs are eligible only for existing mortgages and require that borrowers contact their lender at least 15 days before filing bankruptcy, a provision Citigroup Inc. C: 4.21 +18.59%) required before it would throw its weight behind the bill, according to a report by the Wall Street Journal. Also, the proceeds of any property sold within five years must be shared with the lender, and borrowers proven to have committed fraud to obtain their loans are restricted from eligibility.

Reports began circulating in early January that the Senate’s version of the forthcoming economic stimulus package would include these cram-downs. Democrats have long advocated allowing judges to modify principal amounts of mortgages on primary residences in Chapter 13 bankruptcy cases filed by debtors; currently, such modifications are precluded by law. In contrast, Republicans and most industry groups have strongly opposed so-called “debt cram-down” proposals for mortgages, saying that allowing cram-downs would add to the costs of a mortgage for most consumers and swell
Key industry analysts have been suggesting that allowing so-called cramdowns to take place will likely lead to further significant write-downs in an already battered secondary mortgage market — leaving banks with even larger-than-expected holes on their balance sheets. Analysts at Bank of America Corp. BAC: 7.39 +13.69%), while suggesting on Jan. 13 that such provisions would likely lead to a spike in bankruptcy filings, also said that aspects of the proposed bankrupcy law would serve to limit potential investor losses.

[heidi79]

Hopefully this will get the attention of investors and they begin to more quickly and efficiently modify our loans. It's wrong that people would have to file bankruptcy in order to get a principal reduction. Let's see what happens!

[Witts_end]

I agree.. It seems, that there is enough people who are trying to save their homes, that they would be willing to pay higher than current market value.. So if they could just come to some happy medium.. Example.. My loan is for 589k, my house is worth 312k.. I would take a 420-450k loan at current rates to stay.. They can require full payment back should I sell the house within 5 years.. I just think they could make more money if they would work with people instead of nickel and diming them to death..

[selphie]

I've come full circle to the reality that I was screwed on my first time home purchase (chalk it up to young and dumb). 3 years into this fiasco I am so much more educated. The question I am asking myself now is if this should pass, would it be worst for me to just walk away from my house or file chapter 13 to try to keep it? Which will destroy what's left of my burnt-up credit more?

[Al_2009]

I wonder if principle reduction would be considered only in cases of bankruptcy? That would be short-sighted, even by current Washington and Wall Street standards.

My house is worth about $80k less than my mortgage, which I modified this year (interest lowered, principal raised, so I'm further underwater, but at least I can stay this way for a while longer). The bank refused to consider reducing principal at that time, but I'm hoping for favorable legislation this year, in which case I'll be all over it.

[Witts_end]

Maybe everyone should unite together and designate a month or two and no one pay their mortgage.. Then we will see how the market turns.. If the gas companies, suffer from a day, imagine what we could do to the banking industry then.. Just one month.. American united together.. Lets see them write that one off!! Although they would probly just ask for another bailout and leave us hanging...