Should Home Mortgages Be Modifiable In Bankruptcy?

[Rigby]

Presently, mortgages on a principle residence cannot be modified by a bankruptcy judge. These are the only loans that cannot be modified in bankruptcy.Congress is considering allowing them to be modified and has been given support by Citigroup(aka Citibank).The rest of the banking industry opposes.Proponents say this is a good way to stem foreclosures.Opponents say it would increase the cost of mortgages since it would increase the risk in making loans.http://news.yahoo.com/s/nm/20090109/bs_nm/us_mortgage_aba_7

[luther]

Don't be too surprised, if mortgages aren't modified to 40-50-60-100 year mortgages....Easiest way to get overbloated mortgages affordable...Better to have people staying in their homes, and paying--FOREVER.. Sorta like the "sociological plantation".. Be a "sharecropper" to your bank...   OR, the bank could keep the LAND, lease it to you, and just mortgage the HOUSE to you.. That's what many banks did in 1935, when too many people could no longer pay their mortgages..Either way, you're just a "sharecropper"...   HINT: That's what Japan had to do when they had their meltdown..   The banks might like to own all the land, as that's the only part of an estate that APPRECIATES.. One day they can sell it back to you for 5 times what you originally paid... Sources: historical common sence... kymlor 60 months ago Please sign in to give a compliment. Please verify your account to give a compliment. Please sign in to send a message. Please verify your account to send a message.

[Kang]

if mortgages aren't modified to 40-50-60-100 year mortgages....Easiest way to get overbloated mortgages affordable...Better to have people staying in their homes, and paying--FOREVER.. Sorta like the "sociological plantation".. Be a "sharecropper" to your bank...   OR, the bank could keep the LAND, lease it to you, and just mortgage the HOUSE to you.. That's what many banks did in 1935, when too many people could no longer pay their mortgages..Either way, you're just a "sharecropper"...   HINT: That's what Japan had to do when they had their meltdown..   The banks might like to own all the land, as that's the only part of an estate that APPRECIATES.. One day they can sell it back to you for 5 times what you originally paid...

[Haig]

To answer my question, it?s traditional. In every mortgage law America has ever had, those who hold the mortgage note have a place of privilige over every other credor of the bankrupt person or company.(Or such is my impression, after a quick skim of this book.) The fact is, for most of the time from this nation?s foundation until 1898, America didn?t have bankruptcy laws; for example, the bankruptcy law of 1800 was repealed in 1803, and America wouldn?t have another one until 1841. Until 1933, bankruptcy law focused on squeezing the debtor enough to discharge all of his debts, or else to come as close to that goal as possible.   From 1933 onward, the goal of bankruptcy law switched from harsh punishment to rehabilitation. Toward that goal, it became possible for bankruptcy judges to modify loans for cars, mortgages on second(and third and fourth) homes, vacation homes, rental property, credit card debt, medical debt -- everything, it seems, except for the mortgage on one?s primary home.   Why is the mortgage on the primary home untouchable, while every other debt can be modified(within limits) by the bankruptcy judge? As the bankers in your link said, it would:   "bring additional risk and uncertainty to an already volatile mortgage market and would make home loans more expensive and less available for consumers."   Given that the spark that touched off this recession was the predictable consequence of home loans being too readily available(specifically to people who no sane banker would have financed when I was a teenager), this strikes me as a Good Thing, not a reason for opposition.   Frankly, there?s one question I haven?t seen addressed. The mortgage bankers need to justify why they deserve a priviliged position, in comparison with credit card companies(usually other banks), auto loan firms(often other banks, especially now that GMAC is officially a bank), vacation home lenders(usually other banks) and even doctors and hospitals. Given that the mortgage bankers, as a class, are the folks who allowed the housing bubble to exist to begin with; they?re also the folks who bungled the whole mortgage modification idea:   Data from the Comptroller of the Currency shows that over 50% of modified loans re-defaulted within 6 months. With many loan mods, payments went up for the borrowers and principal was hardly ever reduced. The loan mods actually left many borrowers in a worse position than when they started.   Why do these people have their position of privilige, as compared to all other creditors? Frankly, as far as I can tell, it?s the last vestige of the 19th Century attitude that the bankrupt are criminals who deserve punishment.* The sad fact is, a little more than half of bankruptcies happen because of medical bills that were not covered by insurance:   And again I say, for emphasis: What justification do the mortgage bankers have for their position of privilige? Until I hear a cogent answer, I will believe that it?s as fair to modify mortgages on primary homes as on vacation homes.         * I am sure that there are some; the fact is, however, we?re probably talking about a single-digit percentage of those who file.

[Rayce]

Why are the only loans that *cannot* be modified in bankruptcy court? To answer my question, it?s traditional. In every mortgage law America has ever had, those who hold the mortgage note have a place of privilige over every other credor of the bankrupt person or company.(Or such is my impression, after a quick skim of this book.) The fact is, for most of the time from this nation?s foundation until 1898, America didn?t have bankruptcy laws; for example, the bankruptcy law of 1800 was repealed in 1803, and America wouldn?t have another one until 1841. Until 1933, bankruptcy law focused on squeezing the debtor enough to discharge all of his debts, or else to come as close to that goal as possible.   From 1933 onward, the goal of bankruptcy law switched from harsh punishment to rehabilitation. Toward that goal, it became possible for bankruptcy judges to modify loans for cars, mortgages on second(and third and fourth) homes, vacation homes, rental property, credit card debt, medical debt -- everything, it seems, except for the mortgage on one?s primary home.   Why is the mortgage on the primary home untouchable, while every other debt can be modified(within limits) by the bankruptcy judge? As the bankers in your link said, it would:   "bring additional risk and uncertainty to an already volatile mortgage market and would make home loans more expensive and less available for consumers."   Given that the spark that touched off this recession was the predictable consequence of home loans being too readily available(specifically to people who no sane banker would have financed when I was a teenager), this strikes me as a Good Thing, not a reason for opposition.   Frankly, there?s one question I haven?t seen addressed. The mortgage bankers need to justify why they deserve a priviliged position, in comparison with credit card companies(usually other banks), auto loan firms(often other banks, especially now that GMAC is officially a bank), vacation home lenders(usually other banks) and even doctors and hospitals. Given that the mortgage bankers, as a class, are the folks who allowed the housing bubble to exist to begin with; they?re also the folks who bungled the whole mortgage modification idea:   Data from the Comptroller of the Currency shows that over 50% of modified loans re-defaulted within 6 months. With many loan mods, payments went up for the borrowers and principal was hardly ever reduced. The loan mods actually left many borrowers in a worse position than when they started.   Why do these people have their position of privilige, as compared to all other creditors? Frankly, as far as I can tell, it?s the last vestige of the 19th Century attitude that the bankrupt are criminals who deserve punishment.* The sad fact is, a little more than half of bankruptcies happen because of medical bills that were not covered by insurance:   And again I say, for emphasis: What justification do the mortgage bankers have for their position of privilige? Until I hear a cogent answer, I will believe that it?s as fair to modify mortgages on primary homes as on vacation homes.         * I am sure that there are some; the fact is, however, we?re probably talking about a single-digit percentage of those who file. Sources: http://books.google.com/books?hl=en&id=30P1ETv_sesC&dq=history+of+bankruptcy+law&printsec=frontcover&source=web&ots=K8J0ej6JfP&sig=Hi_lqWdlJfJYQPoB8Aox86PVXfI&sa=X&oi=book_result&resnum=2&ct=result#PPA62,M1 http://www.bankruptcydata.com/Ch11History.htm http://news.yahoo.com/s/nm/20090109/bs_nm/us_mortgage_aba_7 http://seekingalpha.com/article/113614-new-mortgage-bankruptcy-bill-does-not-address-real-problem http://www.occ.gov/ftp/release/2008-150a.pdf http://content.healthaffairs.org/cgi/content/full/hlthaff.w5.63/DC1   Murstein's Recommendations An American Epidemic: Mortgage Fraud--A Serious Business Amazon List Price: $16.95 Used from: $10.59 A remarkably prescient book, given that it was published in 2005. "For the most part . . . the perpetrator isn't a professional thief -- or even a borrower -- it's one or more of the dozen or so specialists . . . who touches the mortgage as it winds its way through the approval process. Most cases -- 80 percent by one estimate -- involve insiders . . ." Murstein 60 months ago Please sign in to give a compliment. Please verify your account to give a compliment. Please sign in to send a message. Please verify your account to send a message.