Obama Bankruptcy Bill At Risk - No Teeth Water Down ?

[Irish Gal]

The powers that be that have been politically placating struggling homeowners with false hope ad nauseam with no real results are now at risk of completely blowing the bankruptcy cram down bill intended to truly help struggling (underwater) homeowners. It never ends. If they mess this up, and water this bill down so much that the bankers again get their way, and struggling/underwater homeowners get screwed again w/ a no teeth bill, folks reeeaaallllly need to rethink why they would ever work with these lenders at all and not just walk away. Just my opinion.


HOUSING FIX'S BANKRUPTCY PLAN UNDER FIRE

Lawmakers balk at proposal to change bankruptcy law to allow judges to adjust mortgage terms - a measure central to Obama's foreclosure effort.

By Tami Luhby, CNNMoney.com senior writer

March 1, 2009

NEW YORK (CNNMoney.com) -- President Obama is in danger of losing the biggest stick in his foreclosure prevention arsenal.
The administration's plan to stem the housing crisis depends on Congress amending the bankruptcy laws to allow judges to modify mortgages, in particular by reducing principal to make monthly payments more affordable.

The so-called cramdown provision could put pressure on loan servicers to modify mortgages before borrowers file for bankruptcy.
A major critique of the voluntary modification programs is that servicers aren't doing enough to help struggling borrowers. But servicers will likely be more aggressive in working with homeowners if they know that the borrowers can turn to judges for relief.

"Reforming mortgage bankruptcy laws is the only remedy available that will provide the stick to go with the carrots that we have offered lenders to modify mortgages voluntarily," said Rep. Brad Miller, D-N.C., who worked on the legislation.

But congressional Democrats, who first introduced a bill broadening judges' power two years ago, are running into trouble gathering the support needed to pass the legislation. The House postponed a vote on the measure until early this week after a group of centrist Democrats voiced concerns. And its future in the Senate remains in doubt with many powerful Republicans strongly opposed to the legislation.

The House bill would allow judges to modify loans originated before the legislation's enactment. It would let the courts change mortgage terms to make a loan more affordable, permitting judges to reduce the principal to the property's market value, a step servicers loathe.

The Congressional Budget Office estimates more than one million households would benefit if bankruptcy judges were allowed to modify loans.

Debtors, however, would be required to contact their servicer about modifying their loans at least 15 days before filing for bankruptcy. And the debtor cannot have falsified information when he or she obtained the mortgage.

Trying to drum up support for the measure, administration officials are testifying before Congress and meeting behind closed doors with lawmakers to convince them of the need for the bill, while promising to limit its use.

"Carefully tailored bankruptcy reform is a piece of the solution," Housing Secretary Shaun Donovan told the Senate Banking Committee on Thursday. "We do not see bankruptcy court as the place to work out mortgages."

Giving bankruptcy judges the power to modify loans on primary residences -- they already can change mortgages on vacation homes -- is extremely controversial.

While Citigroup, which is under the close watch of federal regulators, has said it would support the measure, many key players in the financial industry are lobbying against the measure. Industry advocates argue that cramdown would force lenders to charge higher rates to compensate for the increased risk and uncertainty in mortgage contracts.

"This legislation will inject more risk into the housing and mortgage markets at a time when everyone is working hard to strengthen the housing market," said John Dalton, head of the Housing Policy Council, an offshoot of the Financial Services Roundtable.

If the measure must pass, the industry would like to see a requirement that borrowers have had to be offered and accepted a loan modification before seeking bankruptcy relief. Lobbyists also want to provision limited only to subprime mortgages. Also, they would like any principal balance above the home's current market value to be deferred rather than forgiven.

"Judicial modifications should be a last resort and only available where other non-judicial options have been exhausted or not available," John Courson, head of the Mortgage Bankers Association, wrote in a letter to Donovan and Treasury Secretary Tim Geithner.

[jhn_plsn]

This is not good news. I was looking forward to this passing as I am sure many were. I do understand that the banks may not be able to weather this big a hit and there needs to be some middle ground, but if you and I can get shored up a bit we could get this economy going again. I'm due for a newer car and stuff like that.
I will admit that I was lucky enough to have Downey Savings adjust my first but it looks like I may have to do a chapter 13 BK to deal with the 2nd. All I was asking them(Countrywide/BofA) to do was lock in a mutually benifitial fixed rate for the life of the loan, but they said no. Will I feel bad about cramming them down???

[Irish Gal]

I read the enclosed article today which basically says the banks are writing the Bankruptcy Bill themselves and trying to seriously water it down to nothing (with Obama's appointee, Ellen Tauscher, a former, Wall St. investment banker). Again, another "friend of bankers."

If you are so inclined, you can go to the article directly and click a button to voice your opinion (rage!) as a homeowner to Speaker Nancy Pelosi about your great distaste for how the Bankruptcy Bill is going down, thus far. If you're a California, struggling, homeowner who hopes to seek some kind of real help through the Bankruptcy Bill, you should be concerned about Rep. Ellen O. Tauscher, who chairs the New Democrat Coalition (very conservative Democrats and/or Wall St. insiders/lobbyists, etc.). This group is helping the bankers to seriously handicap the Bill (against homeowners). They are doing this all very quietly. Folks, take a few mins to get involved and speak up for yourself. Show your outrage. Write an editorial. Write/call your reps. Let your outrage be heard ! And, of course, vote these bums out next election.

ARTICLE:

Jane Hamsher (Huffington Post)

Posted March 2, 2009

ELLEN TAUSCHER (D-BofA) HELPS BANK LOBBYISTS WRITE OUR LAWS

I've talked to probably a dozen people involved with the bill allowing bankruptcy judges to write-down mortgages, which would reduce foreclosures by 20% and wouldn't cost the taxpayers one dime. Every single person I spoke to said the same thing -- it's disgusting that banks are writing the legislation, watering it down so it is meaningless with the help of Ellen Tauscher and the New Democrat coalition.

On Saturday I wrote about the efforts of former Wall Street investment banker Tauscher to gut the legislation on behalf of banks, who are holding out hope that they can unload their bad loans on taxpayers and never have to take responsibility for their mistakes.

I promptly got a call from Jonathan Kaplan, Tauscher's press secretary, who said that the New Dem's Executive Director Adam Pase, a former lobbyist for predatory lenders who worked to undermine regulation of subprime loans, was not working on this issue. Nor, he claimed, was Tauscher taking the lead. He said Tauscher was only trying to help homeowners before they got to bankruptcy court, and wasn't trying to weaken anything.

Lo and behold, this morning we find not one but two articles where Tauscher brags about her leadership of an effort to "limit the scope of the bankruptcy bill as much as possible," saying that "it shows we have bench strength, and it shows we can flex." Adam Pace was circulating memos on the bill, and an article in Roll Call this morning (subscription) states that he is "widely credited with bringing a sharp organizational focus that has reinvigorated the group."

The upshot? Nancy Pelosi "buckled" and suspended consideration of the housing bill at a time when it is desperately needed.
(You can tell Speaker Pelosi to stand up to Tauscher, the New Dems, the banks and the lobbyists here.)

Business week also has an article detailing the way that banks are dictating how this legislation is being written. Lobbyist money is flowing into the coffers of Tauscher's New Dems, and nobody on the Hill even bothers to pretend that they are doing anything but representing corporate interests over those of the people who elected them.

New Democrats Bill Foster, Gabby Giffords, Shelly Berkley, Brian Baird, Melissa Bean, Patrick Murphy, John Larson, Dennis Moore and Jim Moran represent districts that will be the hardest hit by the foreclosure crisis. Caroline Maloney and Ed Perlmutter are not on the list, but they are New Dems who have been vocal in their support for Tauscher's efforts.)

How do they explain to their constituents that thousands of homes will go into foreclosure in each of their respective districts without this legislation, dragging the value of other properties in the area with them in an endless downward spiral? Do they really think voters won't notice that they are aligned with the financial services industry against them?

You can write a letter to the editor of your local paper letting them know you'll be watching your representative's vote here.

Bank lobbyists worked through Tauscher and others to keep mortgage write-down from happening in 2007, when it could have been really helpful in softening the economic blow. How can Tauscher claim that there's anything "moderate" about working on behalf of the bankers who created this crisis? How do the New Dems justify tying the hands of bankruptcy judges when both Barack Obama and leading economists say it's vital to arresting the economic crisis?

When Democrats were given the keys to Congress and the White House, nobody did so with the idea that they should become the new recipients of K-Street lobbyist money, fattening their own coffers while the public suffers. The idea that they are being "fiscally responsible" is laughable.

[ManicMangaManiac]

Irish Gal,
Thank you for posting this. Of course, I am outraged!!! This entire country is going down the tubes and it's all because of these accursed lobbyists and bankers!! I almost feel like a bunch of us need to band together and storm Congress with baseball bats and pitchforks and torches (LOL) to get the point across that we've all had it up to here with them. Seriously, what is it going to take to make them listen to us?? And we don't have the luxury of waiting till the next election either--Sally

[Irish Gal]

DEMOCRATS REACH DEAL ON MORTGAGE RELIEF BILL

By JULIE HIRSCHFELD DAVIS and JIM KUHNHENN, The Associated Press

March 3, 2009

WASHINGTON — House Democrats, under pressure from a group of moderates in their ranks and the banking lobby, agreed Tuesday to narrow legislation that gives bankruptcy judges the power to force lenders to rewrite mortgages for debt-strapped homeowners. The compromise legislation was expected to come to a vote in the House as early as Thursday.

Under the terms of the agreement, judges would have to consider whether a homeowner had been offered a reasonable deal by the bank to rework his or her home loan before deciding whether to take judicial action to lower the interest rate or principal.

Borrowers also would have a responsibility to prove that they tried to modify their mortgages with their lenders before seeking help in bankruptcy court.

"If there is modification available, you would prefer that than a bankruptcy," said Rep. Zoe Lofgren, D-Calif., one of the centrist negotiators on the bill.

Democrats said the goal was to make bankruptcy clearly a last resort for homeowners in danger of losing their homes.
"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.

Mortgage lenders who mounted a costly and successful effort last year to kill the measure, which they call the "cramdown," have been lobbying intensely to restrict the bill. They argued that mortgage adjustments made in bankruptcy would raise mortgage interest rates for all consumers and create a wave of bankruptcy claims.

Their opposition helped derail the legislation last week, even after leading Democrats had agreed to restrict it to people who had tried other means of reworking their mortgages and those who couldn't afford their home loans.

The industry has "been giving it everything they've got," said Rep. Brad Miller, D-N.C., an architect of the legislation. "They still have remarkable influence." Still, Miller and some other backers of the idea said they support the new plan. "It would encourage lenders to make modifications and there would be consequences if they don't do it," Miller said.

Democrats discussed the compromise in a closed meeting Tuesday with Housing Secretary Shaun Donovan, who told them the legislation would dovetail with the administration's overall efforts to reduce foreclosures. Obama unveiled a $75 billion housing initiative two weeks ago that included a call for legislation to permit adjustments to mortgages in bankruptcy court.

Following the session, Lofgren and two other moderate Democrats – Ellen Tauscher and Dennis Cardoza of California – circulated a letter seeking support for their compromise. "Some may think the changes made to the bill go too far while others will contend that they do not go far enough," the "Dear Colleague" letter said. "Given the ever-deepening housing crisis, however, we ask you to place such differences aside – as we have done –and support this effort."

The deal would require judges to consider whether homeowners were offered a "qualified" loan workout – defined as one that would meet Obama's goal of monthly payments equal to about one-third of a homeowner's income.

The agreement includes changes whereby bankruptcy judges would have to deny a judicial mortgage adjustment in cases where the homeowner is deemed able to afford the loan.

Lawmakers in the centrist New Democrat Coalition and the fiscally conservative Blue Dog Democrats who said they were concerned about how the measure would affect people struggling to pay their mortgages worked through the weekend to cut a deal they could support.

Some liberals said the new limits were inappropriate. Rep. Maxine Waters, D-Calif., said many mortgage companies make it impossible for homeowners to even complete a phone call to their lender, much less work out more affordable loan terms.

"I don't think people ought to have to go through that mess" to get mortgage relief in bankruptcy courts, Waters said. She said the banking industry still has a stranglehold on Congress. "These guys rule this place," Waters said.

[martialgir]

Actually, this new revised scenario works for me. As far as documenting the contact with the lender, I have retained my initial paperwork (fax cover sheet) from back in November when I applied for the Hope for Homeowner program. I have kept a log of all the phone calls attempted since December when I first became delinquent. I sent a loan modification proposal based on what I could afford by certified mail in January and most recently sent additional documentation and a final proposal, by certified mail, to three different departments (loss mitigation, the executive offices, and the land title department, three different locations in three states) a week ago stating that if they did not work with me and accelerated my mortgage, this was their official notification that I was going to file a chapter 13. I know I am covered as far as meeting the time requirement for trying to work things out and being able to document it.

I have had only one phone call through this entire period and now owe four months. I have received the notice of default but nothing more. After reading everyone's various scenarios, I believe that if you document all phone calls, contact with NACA or other entities, save your fax cover letters and then send an official "this is your notice I am considering Chapter 13 which will result in a cram down" the timing is such that we may now have leverage to delay until something can be worked out or follow through with the Chapter 13. This is good news for many of us and it puts more control back into our hands as we have a viable threat and the one thing the banks/lenders have been trying to stop.

I hope my negotiations work out as well as everyone else's.
I will keep you posted.

[snapple candy]

I thought this was interesting:

"Debtors, however, would be required to contact their servicer about modifying their loans at least 15 days before filing for bankruptcy. And the debtor cannot have falsified information when he or she obtained the mortgage."

What if the loan closers falsified income information like many have without us knowing about it? We are are liable for reading the fine print when we sign our loan docs.(Yeah we all read every word and every page) I can see where this is going. The lenders lawyers are going to have a heyday with this one. Dollars signs in their eyes.No write down of principal for you because you didnt read the fine print and signed a fraudulent document. Do you really think those loan closers that gave all those people mortgages they couldnt afford and inflated their income to qualify them will be held accountable?

If you file for BK hoping to get a reduction of principal, be prepared for them to attack you on this point and/or hope your mortgage broker had integrity.These attorneys are paid big bucks to prevent you from getting a write down causing investor loss. Get a copy of your loan docs and review with fine tooth comb and compare to your originals. It is not uncommon that documents get altered along the way (or key ones left out) to make sure they dont take a hit. I hate to be a pessimist but dont kid yourself about what these guys are capable of. CYA. Look at what they are already doing to water this down. Money, greed and power. They have it and we dont.

[martialgir]

In my case, it's not a problem. I got a 30 year fixed rate loan at 6.375%, 20% down, full doc loan. I lost a high paying job a year ago and now work at 1/3 of what I was making before. I guess my scenario works for both the Chapter 13 option as well as the new Obama "making homes affordable" modification program.

I was just reading the guidelines and it looks like anyone who got a stated income/stated asset type of loan is not going to be helped by the new legislation regardless of whether or not it is the BK legislation or the modification program. That is not fair. These mortgages are the most toxic of all, and were created by the Baron's of Wall Street because of the short term securities value as well the huge commissions earned by the loan officers who originated them. I worked for a mortgage company that had loan officers who wrote these right and left because of the huge up front commissions. (I was not involved in originations) The fact that there is no legislation that assists borrowers in these loans is criminal. I am glad I can be helped but I would like to see more across the board assistance. Selective restrictions are wrong!

[snapple candy]

I know I had a non-conforming with 20% down myself but 10 yr. interest-only at 6.5%. Almost 2 years later, due to massive and extended custody litigation, I was pushed into Chapter 13 and financially ravaged by attorneys (why I don't have much respect for them). I almost lost my house then and WAMU tried to pull some fast ones on me by not applying payments appropriately so they could file motions and start foreclosure proceedings prematurely. Then later made me pay excessive fees. I have had further hardships occur including not being able to find decent paying employment that would keep my head above water. I have been trying to negotiate with WAMU now for 9 mths and they keep changing the terms and lie about what they say. Chapter 13 not an option for me but 7 or 11 maybe if I want to hold onto my house. I really dont want to go there and hope WAMU will step up to the plate and offer me a sustainable payment and plan. Based on my experience with them, I am cautiously optimistic but only if Obama's plan has some teeth in it that will allow me to hold lenders feet to the fire. Like many of us, there may not be any teeth for us in his plan that would assist us in modification or true restructuring. We just may have to be prepared to walk away.

[martialgir]

I cannot believe what you have been through in your BK. Were these attorneys for WAMU? What about your own attorney? Doesn't the Trustee monitor things like the payment applications and fees that are imposed? I need to know what may happen in case I have to go down this road, myself.
My lender is Homecomings (GMAC) and other than being non-responsive, I kind of have them over a barrel right now. There are other aspects to my scenario but between the Chapter 13 and these new guidelines they are going to be forced to work with me, and believe me, I have kept my paper trail together like an underwriter. (guess what! I am for USDA and the rural development home loan programs!)
Actually, I have been in the mortgage business for over 25 years but my origination days are many years behind me. I am personally very fiscally conservative (hence my own loan choices) and pretty much originated only vanilla, 30/15 year fixed rate conventional/Jumbo loans. When things started getting crazy with all of the hybrid loan products, I pretty much jumped out from originating and went into another area of the company. (recruiting loan officers) I knew this was going to be big trouble down the road because these loans did not make sense from a risk perspective and with every Joe Blow originator/former used car salesman jumping on board to make a quick buck at the expense of their customers, I wanted no part of things.
I could go into a "those were the days" stroll about how we got here and how I saw the mortgage business evolve from the mid 80's, to now but it is a very sad story based on greed on all levels; the secondary market, the banks, the realtors, originators and yes, sometimes the customers.
The bottom line is that much of what has happened is based on a rigged system. It has been rigged against those at the bottom, for so long, that even when a lifeline appears to be thrown to us, there are so many conditions that it saves only a few. I have been very lucky to have been on the inside so that when I do have to negotiate or when we get down to the bottom of it, for me, I will know exactly what to say to maximize getting what I want. Maybe I won't, in the end, but it does give me an advantage.

Anyway, don't your written agreements with WAMU become a contract? How can they change the terms without your signature? Are you still in your repayment period? What does the Trustee say about all of this or does it not go before the Trustee? I thought the Trustee had to approve any changes to the court approved bankruptcy? Please enlighten me. I may need to be prepared. Thanks.

[snapple candy]

martialgir,
Yes, it was attorneys for WAMU contracted out for their BK dept. WAMu didnt apply my payments I continued to pay after filing for BK. This triggered a premature default status and referral to attorneys by WAMU BK dept. I always intended to keep up my regular payments while in BK and did. Personally, it was legal manuevering and a way to get extra fees.
My attorney knew I didnt have any money and had already paid him a flat fee to handle the BK. Answering a new motion would be extra time for him. Time i hadnt or couldnt pay for. He told me not to worry about it. Well I ended up negotiating with the WAMU attorneys directly myself since he wnated to let it go. I did get them to cut the fees half way. It was BS. In the end, I fired my attorney and took over my own case with regards to my student loans associated with my BK and was quite sucessful on my own. For all those considering BK and paying flat fee for attorney, remember they do the minimum that is required and if it gets complicated or requires more effort, the let you take your lumps unless you are willing to cough up more money. As for the BK Trustee....keep in mind they all (attorneys) work together everyday and cover each other. Dont exepct them to protect your interests either. There is so much corruption in the judical system and with trustees. This was BK that was over 2 years ago and already discharged. I was current on home payments and paid their stupid fees.
As for WAMU now, I have been trying for a modification since my circumstances have worsened and the terms they offered me before my forebearance (NOv 2008) were verbal so I have no proof of what they offered me. This is why I advise you all out there to follow up with conversations you have verbally about terms with a letter confirming your conversations in writing. When I confronted WAMU with the conflict of terms they offered me previously, they lied and said they never offered me that. OH...but to call them and we could discuss it. They only want to discuss terms over the phone and as others have shared, many excessive fees are never disclosed to them and are not listed on the modification paperwork, you get the surprise when you get your first payment coupon.
I cannot go for another Cpt. 13 BK, but considering 7 or 11 if I qualify and if WAMU/Chase wont offer me a decent restructuring.

[snapple candy]

martial girl,
PS: Trustee only handles payments to creditors in restructuring BK which is 7 or 11. Not in 13.
In 13 when you are seeking and can qualify to do total discharge of all debts and keep your house, once lender is served notice of BK filing, I discovered lender discontinues (this happens with 2nd also) all monthly billing statements so you have to go make payments without payment coupons.
After calling WAMU (whom holds 1st & 2nd)and asked for my billing statements, I was directed to have my attorney fax them a letter allowing them to restart billing which he did. The 2nd began billing again. The first did not. Because I wasnt getting statements, i didnt know they were not applying monies. I was furious when this all happended of course.When I spoke with them about it, they just said you need to call us every month to find out account status.
Even now, some 2 years later, I am still frozen out of my accounts on-line by WAMU and cannot monitor what they are doing to my account or even see a transaction history.

[martialgir]

Snapple,

You have really given me alot to think about. I really appreciate your detail and hope I can learn from and use this information to make the right decisions (like selecting a caring attorney rather than someone who gives the minimum) if I am forced to do this. You are right about the legal community being in bed with each other. I wonder if some jurisdictions are simply more currupt than others? I live in Virginia and I can choose to file in either the Alexandria Court or the Richmond Court due to being located approximately right in the middle of both, in Central Virginia. Maybe I should do some research about the different Courts and what the petitioners have to say?

I hope you find some resolution that is fair and reasonable in the end. It really ticks me off to see how the system keeps giving it to some of us, where the sun don't shine, over and over and over again until there is nothing left of a life. It makes me sick to think that for some people there is no such thing as a fresh start. I just read an article yesterday about creditors going after the debts of people who have died to their next of kin. How sick is a society that collectors chase the bereaved in the hopes of getting someone to payoff the debts of a person who has died when they have no legal right to, unless there is an estate from which the debts can be paid?

Anyway, thanks for the info. and keep us posted on any progress. At least you have an anonymous yet caring audience!

[jhn_plsn]

You two are just adding more gray to my head and chin.
I am in the middle of paying a lawyer for a ch13 restruture in hopes of stripping the 2nd. The first worked with me and I am satisfied but that interest only payment leaves me at the 1/3 threshold. The 2nd told me I had an extra $10 per month so they would not modufy and all I was requesting was to lock the interest rate so it would stabalize things. They refused, but I have the records to show my efforts. It amazes me that all these clowns create a budget for YOU but never factor in anything like a car repair or basic illness. If they cannot set people up for success how will they ever get us to borrow again. We have been living cash only for a few years now, it tough but we manage and I will continue as best I can.

My question with these new rules is will they be in effect in a ch 7 (non-restructure=no monthly payment) or will it still be locked into the ch 13 (restructure=with monthly payment)?

Any thoughts.
PS I am in California.

[martialgir]

Snapple and JHN,

Your stories have scared the beejeezus out of me! Obviously, your attorneys have not properly protected you and I don't want to be left out there floundering around either in the strategizing process or later on down the road after they have gotten my money.

I started a google search in my area until I found attorneys who were consumer advocates and whose primary business is bankruptcy. This will eliminate using someone whose practice is scattered and who might not be up on up to the minute changes. The one I found, who I have already set an appointment with, is a member of NACBA which is the National Association of Consumer Bankruptcy Attorneys. I went to their website and what I found is pretty much up to the minute and the consensus seems to be very pro-consumer. I toss this out there to anyone who needs to find someone in their area for bankruptcy instead of just a phone book search. I want to make sure I have someone fighting for me all the way if it comes to this and who is familiar with stripping liens and other strategies to maximize what I can keep, pay, etc.

Thanks for sharing. It helped guide me to what I feel is an appropriate direction for me.

[snapple candy]

Im glad my sharing is helpful. Expect and prepare for the worse and you will survive the process.BK in general is pretty straightforward and less preditor type behavior. The NACBA is a good place to start. Good luck.

As for how these guidelines effect Chapter 7, I am not sure but wondering myself since I have already been thru 13 and cannot file again. Check with an attorney (they should know) to find out which jurisidiction would be better to file in. Sometimes you can identify the good and fair judges but that can be a crap shoot who you will be assigned. I would go for where the most good judges (& least conservative) are and hope you get one. These new guidelines are adding a curveball to them and honestly not sure what some might do as there are no presedents to follow. You will be breaking new ground.

I can only say that I after a few attorneys, the ones that whom appeared the most friendly and understanding, were the ones to screw me the most....all with an insincere smile on their face. I so misjudged them. I always try to be hopeful and an idealist but our legal system, as well as other systems are so damaged and sick people in charge. There is such a lack of caring for others, I fear our society heading in a bad place. I sincerely hope for my children and others, this world will turn in a more positive direction.

[Irish Gal]

<<<can only say that I after a few attorneys, the ones that whom appeared the most friendly and understanding, were the ones to screw me the most....all with an insincere smile on their face. I so misjudged them. I always try to be hopeful and an idealist but our legal system, as well as other systems are so damaged and sick people in charge. There is such a lack of caring for others, I fear our society heading in a bad place. I sincerely hope for my children and others, this world will turn in a more positive direction.>>>

Snapple,

I thoroughly enjoy your well thought out posts. You are a wise woman. I am sorry for the bad BK experiences you have had. I agree with you about our legal system. Law schools seem to kill souls, spit out narcissists who over-value themselves at the expense of all else, and who turn the whole system into nothing but another money/ego game. Too many lawyers everywhere. Gov't. Wall St. Every Committee. Every Board. Can't get anything done because everyone thinks like a lawyer. Can't do this ... liability ... can't do that ... liability ... nobody can trust anyone anymore because our legal system exploits litigation to the max. Then, when there's a real cause i.e., consumers need a kick arse AG to act on their behalf, no can do. Nothing gets done.

Hang in there. You've got it figured out.

[candice]

Maybe if we are able to file a chapter 13 to bring the balance of the loan to appraised value of the property, the lenders might modify the loans. My experience as been they won't work with you. I have spent 9months trying to get my loan modified, with no success. I have two laons on my home . Neither will modify

[chasepmt2hot-firefighter]

MartialGirl,

What did you mean by this statement? Anyone self-employed or 1099 and not a W-2 won't get a mod? Please explain...

" I was just reading the guidelines and it looks like anyone who got a stated income/stated asset type of loan is not going to be helped by the new legislation regardless of whether or not it is the BK legislation or the modification program. That is not fair. "

[jhn_plsn]

With so many restrictions it seems like it will help fewer and fewer people. Sounds just like the way Bush went about it, experiment by giving a little at a time, and when one seems to have an suficient effect they will stop. So get in while you can seems to be the motto right now, before the program oportunities all go away.
One thing I fear is changing rules going into a BK. I would hope that the rules under ch 13 still apply in that the 2nd may qualify to be written off, at the least. Again I would rather not file at all but a CH 7 allows you to re-start your life much sooner.

This all leaves to many un-answered questions.

[snapple candy]

So many unanswered questions. Too many! I met with an attorney/mortgage broker yesterday thinking I might get some clarity with regards to new guidelines, etc and there are no clear answers for anything. Based on what he said, I have to agree this is a science experiment and I think the lenders are waiting to see where the bottom is before they start negotiating much with anyone, if at all. According to broker, all these guidelines are so new and will be applied on a case by case basis.There is no clear path to choose with a known outcome in the end. They throw us a bone once in while to raise our hopes but I suspect the clouds will not clear for sometime to come.
I am not expert on BK but I cannot imagine rules changing with regards to 2nds midstream. Either you fit the criteria to qualify for discharge or you dont. Also rules at the time of filing (not at time of discharge) might apply but may be up to discretion of judge and how forceful an attorney you have. I hope you share with us what BK attorney has to say about this.

No one really wants to file BK (well there might be some that abuse it) but when your back is against the wall and their is no relief in sight, it relieves a big burden off your shoulders and allows you to start over and rebuild your life, hoping having learned some lessons about how you got there in the first place. If Chapter 13 allows for the principal reduction and discharge or reduction of 2nd, and allowed to keep your house, you will be in such a good place. I hope these changes will give some the relief they need and deserve. The rest of us will just have to suck it up and figure out a way to move forward.

[Moe Bedard]

self employed borrowers can be eligible for the modification...they would have to have the proof of their income........which most should............ the ones who would have a difficult time qualifying for the modification, are borrowers that overstated income to qualify for a property that was out of their true and accurate financial picture and reach at the time.



Income and Asset Validation:

The borrower’s income will be verified by requiring a signed Form 4506-T (Request for Transcript of Tax Return) and obtaining the most recent tax return on file for each borrower on the note. For wage earners, the two most recent pay stubs for each wage earner on the note will also be required. For self-employed borrowers or for non-wage income, the borrower’s income will be verified by obtaining other third party documents that provide reasonably reliable evidence of income.
Borrowers must also represent and warrant that they do not have sufficient liquid assets to make their monthly mortgage payments.

[Walking Away]

Hey *** or anyone else who might know, do you know what they mean by "third party documents" for self employed? Is that like profit and loss statement? Or maybe bank account deposits?

[martialgir]

Hi Firefighter,

Maybe my statement about self employed versus W-2 was incomplete and not fully clarified, but what I meant was that most of the hybrid loan products that are in trouble now were based on stated income type loans. In others words, inflated, unverified income (whether it was done with the borrowers knowledge or not) which would exempt those borrowers from being able to modify under the new Obama plan or qualify for a cram down under the proposed bankruptcy provision.

I believe this legislation was worded very carefully because loans originated under these products were not Fannie/Freddie or other GSE backed, which means the government cannot legislate the outcome. Based on what I am reading in most of the stories here, especially where these products are concerned, it is the end investor and not the servicer who is creating the log jam for not wanting to negotiate. I just read somewhere that one of the servicers/lenders (I can't remember who) is being sued by some big pension fund for doing loan mods without their permission. Eliminating these loans from the eligible pool gets congress/Obama off the hook for not doing anything to help the American people and then places the blame on "dishonest" people for not being truthful on their applications as the reason they can't get assistance. It really is a cop out and caters to the end investor for these loans.

The big picture problem is multi-pronged. Part of the reason homeowners are getting the big run around is because the lenders are afraid of what the investor will do if a mod is offered. Also, since lenders have been laying off employees right and left and are pretty much left with skeleton crews comprised mostly of hourly/temp/inexperienced employees, few people with any real experience in loss mitigation are the point of contact between the homeowner and the lender. I would be willing to bet that alot of the so called "lost documentation" that everyone is complaining about is thrown away or discarded in some way once it is received by overwhelmed, inexperienced "processors" who probably only work on the cases where there is a "squeaky wheel" at the other end of phone. NACA is a big help in this and obviously is dealing with the only personnel who know what they are doing or what tools they have to work out a solution.

So, with the investor problem, the limited ability of loss mitigation personnel to actually do anything, the modus operadi seems to be to stall, delay, do whatever it takes to get a loan through channels (foreclosure) where the processes are known and clear.

Getting back to the legislation; since most of the foreclosures in the first wave were a result of stated income or "liar loans", unless someone can prove beyond the shadow of a doubt that their income was not inflated for the purposes of qualifying, then you can count on being eliminated. This is the whole purpose behind requiring the 4506 which gets IRS transcripts. In the case of self employed borrowers or even 1099 borrowers, when business deductions are taken out of gross income, the net income is significantly lower than the gross and, in many cases, not enough to qualify for an amount that the borrower might want. Which, ironically, is why most of these hybrid, alt-A, stated income loans were developed in the first place; not just for credit issues but for income verification issues. This legislation basically requires that, as far as income is concerned, all of the borrowers that needed the benefit of the product because income could not be verified in the "traditionlal, vanilla, A credit way" now is going to be looked at the same way as if they were trying to qualify that way when they bought the house.

So, in the end, I don't think, statistically, that there are going to be too many self employed, or 1099 employees who are going to meet the qualifying criteria for modification relief, on this particular issue, or the bankruptcy cram down. This is just my opinion but that's how I read it. But we all know what opinions are like....

[Walking Away]

Martialgir; I hope you're wrong or Obama's plans will do very little. The 9 million to be projected to be helped will be more like 1/2 a million. The wording of self employed could go either way; but my problem with Obama's plan is that it remains optional as to whether the loan servicers choose to modify. They've already had plenty of incentives to modify loans from the investors, but loan servicers for the most part have chosen to either foreclose or do repayment plans that make borrowers pay more than their regular payment; as opposed to doing loan mods. I think the decision to modify often depends on the terms of each mortgage and I'd guess the servicers and investors tend to be in agreement; on a loan to loan basis. Many of the sub prime and Alt-A mortgages were bundled up and packaged together and then sold in large pools to Wall Street. From there; many were chopped up into pieces and sold to other investors. Many of these cannot be modified legally or they are much harder to modify; than basic prime loans that weren't chopped up. Many of the pooled loans have contractual agreements that say the loans can't be modified; many have agreements that the originators of the loans have to buy the mortgages back if they modify. So it's a complete mess and my opinion is that "mandatory" loan mods is what's needed; not "optional with incentives". As long as this is optinal, the only real hope is bankruptcy judges. As to the self employed borrower and Obama's plan; the post from *** says: For self-employed borrowers or for non-wage income, the borrower’s income will be verified by obtaining other third party documents that provide reasonably reliable evidence of income.

So maybe a combo of bumping up the 2008 returns and paying more taxes; plus having a strong attorney and having a judge who wants to prevent a foreclosure will work?