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More power for bankruptcy judges

A Foreclosure sign is seen in front of a home in Miami Beach, Fla.

TEXT OF STORY

Bill Radke: As I mentioned, the White House today kicks off a new program
meant to help up to 9 million borrowers keep their homes. The plan allows homeowners to refinance mortgages or modify loans to lower monthly payments. The Treasury has released guidelines to let lenders know how to enroll borrowers. Borrowers can find out whether they're eligible by logging onto a Web site. There's a link to that site at Marketplace.org.

Another part of the program gives bankruptcy judges the ability to modify mortgages. Democrats reached an agreement last night to narrow that reach. Marketplace's Dan Grech reports.


Dan Grech: It's being called the cramdown bill. That's because it crams a mortgage banks don't want down their throats.

Right now, when a person can't pay the mortgage on their primary residence, banks hold all the cards. They can cut you a break on the loan, or they can foreclose on you. The bill in Congress would empower bankruptcy judges to step in. The judge could force the lender to cut the principal on a loan, lower the interest rate, or even extend the life of the loan.

Real estate expert Ilyce Glink publishes ThinkGlink.com:

Ilyce Glink: Nobody wants to go into bankruptcy court. This is a last-ditch place. But if it gets to this point, I think that judges need this mechanism to process these cases and get them through.

Banks have lobbied hard against the bill, and Congress has made some concessions. Homeowners must prove they tried unsuccessfully to work things out with the bank. And banks get a piece of the profits if the house is ever sold. The House could vote on the bill as early as tomorrow.

I'm Dan Grech for Marketplace.

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Lets get real the banks actually make
3 times the loan amount by the time, you pay off your mortgage. Also,
the adjustable rate is actually just paper, it is not actual monies. It is
made up monies added to the loan, without really being money. So I say write off the amounts that were entered into the laon after the real money was applied between the banks.

Lets get real the banks actually make
3 times what the house is worth by the time, you pay off your mortgage. Also,
the adjustable rate is actually just paper, it is not actual monies. It is
made up monies added to the loan, without really being money. So I say write off the amounts that were entered into the laon after the real money was applied between the banks.

This proposal shows the ridiculously deep lack of understanding by the media and lawmakers of how the mortgage process really works today, and the relationship to the current market crisis. I just want to yell "Pull out your brains people!"
Thought #1: It seems pretty well established that this crisis was precipitated by pools of mortgages -- bundles of many people's individual mortgage loans -- which became financial hot potatoes. Why? Because the quality of the loans within the pools either wasn't what it was supposed to be, or turned south for various reasons. They became hard for the market to value because of the uncertainty of how deep the losses in these investments may become.
Thought #2: This risk caused a crisis of liquidity because nobody wanted to buy these pools of mortgages anymore.
Thought #3: The 'Bank' that people think of as the Bank 'holding' their loan really doesn't - they are 'servicing' the loan for the investors who bought the pool of mortgages. That means they get the payment from the borrower, take their skinny portion as payment for this service and turn around and pass the rest of the payment on to the investor who actually owns the mortgage --- may of which (investors that is) happen to also be Banks - but not necessarily and not necessarily the same Bank that is doing the 'servicing'. Therefore, the 'servicing' Bank really isn't the party who is going to take a loss if there is one to take.
Thought #4: If Bankruptcy judges get the power to cram down rates and terms on home loans for borrowers in Bankruptcy....the 'servicing' Bank doesn't really care...but the investor, many of which happen to be Banks...does take the hit. AND - this will lead to even MORE uncertainty about what the actual LOSSES in the mortgage pools held by INVESTORS will be -- leading to MORE illiquidity of these mortgage pools and MORE market instability. THESE ARE THE TOXIC ASSETS WE HAVE ALL BEEN TALKING ABOUT!!! This Bankruptcy proposal will only make things WORSE.

Do some research and educate people about how the mortgage process works today.

James

Why are real estate investors getting a hard time when they are in trouble with there mortgage. Doesn't everyone understand that if investor (landlords) lose out and are forced to forclose hundreds of tenants are going to suffer, This is America and real estate investors are a part of the fabric. I have worked had and I don't no any thing about the stock market, so i saved my money and started buying rental properties for my future retirement.I hurting because i'm going to lose my property and my credit just ten years shy of my retirement. no one was prepared for this fincial situation facing the world.I just need the bank to work with me so I don't have to lose my investment. Can someone tell me how to get the banks to modify my loan?

I don't think any homeowner who has a home equity line attached to their home should have any help with avoiding foreclosure. There is no reporting on the stats that show how many homes in foreclosure are due to equity lines on their homes compared to foreclosure on first mortgages. With HE lines we are bailing out the purchase of cars, boats, furniture, etc!

A link to find out if a borrower is eligible for lower mortage rates was mentioned on the morning show that is supposed to be on marketplace.org. Where is it?

I have listed to the podcast where Paddy Hirsch explains cramdown.
I donot htink that reducing loan UPB is equivalent to the reduction in the loan interest rate. Even if the rate stays the same the P&I payment would change. Where am I wrong?

Please send me the link so I can find out if I'm eligible.

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