Bankruptcy Lawyer Indiana

Every layperson will tell you the same thing: the administration’s Making Home Affordable program is failing to stem the tide of foreclosures. Not only are voluntary mortgage modifications lagging in the face of ever-rising foreclosure figures, but the modifications offered by lenders fail to meet the program’s own requirements, not to mention the needs of the borrowers. The program itself introduces new barriers to the already burdensome process of obtaining a loan modification. Unfortunately, this program represents government at its worst: cumbersome, tedious, expensive and, as it is turning out, useless.

At a recent hearing before the House Financial Services Committee Subcommittee on Housing and Community Opportunity, Congressman Barney Frank of Massachusetts fired a warning shot across the bow of mortgage servicers everywhere: shape up, or watch us pass cramdown legislation, Frank said. Legislation that would allow bankruptcy judgtes to modify mortgages on primary residences is becoming increasingly relevant as reported problems with the program surface.

Tongue in cheek, Congressman Frank said, “The best lobbyists we have for getting bankruptcy legislation passed are the servicers who are not doing a good job of modifying mortgages. And if they do not improve their performance, they improve the chances of that legislation.”

Representatives from the administration testified, however, that while there is room for improvement, the program is on track to meet its goal of assisting 3 million to 4 million borrowers over a period of three years–and a ramp-up period was expected. Forty-eight servicers representing more than 85 percent of the market have signed contracts with the administration. Through August 2009, servicers have extended more than 571,000 loan modification offers, and 360,000 modifications are in the trial period required before the modification becomes permanent.

The problem, however, is that even when operating at full capacity, the program will address no more than one-third of all foreclusres. Consequently, between 2009 and 2012, more than nine million families are expected to lose their homes to foreclosure.

The legislation is failing miserably. This is the reason we advocate the prompt passage of Chapter 13 mortgage cramdown legislation so that the homeowner can finally obtain some meaningful assistance.

President Obama is worried about rising home foreclosures. He is exploring options to increase aid to troubled homeowners.

The president, however, has already rejected a proposal by the Mortgage Bankers Association. The bankers’ proposal is to reorganize and otherwise restructure Fannie Mae and Freddie Mac by creating several smaller, privately held companies, that would issue mortgage securities backed by a government guaranty–not a bad idea.

The U.S. Treasury placed both Fannie Mae and Freeddie Mac into conservatorships with new management nearly a year ago. This was done as banks nationwide were (and still are) sustaining huge losses caused by borrower defaults in subprime and other mortgage loans. The government guaranteed this debt and other morgage-backed securities and has committed up to $400 billion in taxpayer capital (aka bailout money) to fund operating losses caused by the deterioration of subprime products.

The administration has not yet committed to extending its program affording an $8,000 tax credit to first time homebuyers. This tax credit, which has helped to increase the first time homebuyer market, will expire in November of this year.

The government may extend unemployment benefits that are due to expire by year end thereby helping the jobless avoid home foreclosure. Also, it may increase programs to accelerate small business lending. Some of these programs (as extended) could be funded from the already existing $700 billion bank rescue fund which has not yet been depleted.

The Federal Reserve is expected to wind down its purchases of $1.25 trillion in mortgage backed securities and $300 billion in U.S. Treasury debt. These purchases are the main reason mortgage rates have been close to record lows for most of this year.

But, what happens to the economy when these programs which, arguably, have artifically inflated certain segments, have been eliminated? Will the economy revert to the malaise that existed before the first of this year?

The president is doing what he can to increase economic indicators by spending taxpayer money but it’s our fear that once these programs are eliminated, we will be left with another trillion dollars of unpaid debt and very little, or nothing, to show for it.

Unfortunately, it looks like the foreclosure crisis will get worse before it gets better.

Six million loans are either past due or in foreclosure in the second quarter of 2009, the highest level ever recorded. Worse, loan defaults are not the only cause of foreclosures. In some areas, unpaid property taxes are triggering foreclosures, even for homeowners who are otherwise current on their payments.

In recent years, some cities and counties that are strapped for cash have sold their delinquent tax bills to private firms. The firms, which typically charge double-digit interest rates and steep fees, get to keep what they collect. They also succeed to the right to foreclose liens encumbering property, taking priority over mortgage holderss.

Local government cannot undo their previous tax lien sales. But changes in federal policy can reduce the foreclosure risk from unpaid property taxes. This is an issue with which Congress will have to grapple.