The Senate majority whip managed to get a vote on the measure Thursday—as an amendment to a major piece of housing legislation—having struggled to get a stand-alone bill out of the Senate Judiciary Committee, but it was defeated by a vote of 51-45. Almost a dozen Democratic senators voted against it. In contrast, the House earlier this year, passed a watered-down version, which is said to have greater appeal. http://www.cnbc.com/id/30503687 This is disappointing and illogical for a few reasons: 1. This idea is not new. Bankruptcy Courts do cramdowns for cars and vacation/rental homes. The only thing you cannot cramdown is your principal residence in Chapter 13. 2. If you file a Chapter 11 (for people with more than $1M in secured debts or $308,000 in unsecured debts), you can cramdown the mortgage on your principal residence. So you can cramdown your house if you were wealthy enough to have an expensive house or rack up over $308,000 in other debts but not if you are average Joe? 3. Where does this leave us with the foreclosure crisis? a. The government will spend billions on enticing loan mods rather than zero on the bankruptcy amendments, and/or b. Leave it alone, let all these houses go into foreclosure, and the banks lose an average of $50,000 per loan (not including the 2nd lien that gets completely wiped out). Leave it to this government to swing and miss at the fat pitch down the middle of the plate.
Allowing bankruptcy judges to reduce the amount owed to lenders is an INSANE idea, and it's no wonder that a bipartisan majority got together to prevent the libs from further crippling our credit markets. How the heck can you stimulate the banking system by passing insane legislation like this? What lender is going to want to ever write a mortgage again? This move was YET ANOTHER attempt to advance Obama's social agenda at the expense of the banks. Refman, how you can't see that is beyond me. Your argument was a total flop and misses the point. Not persuasive in the least.
No, that is the way it works if you are rich. If you are part of the middle or lower classes, there is literally a different set of rules that applies.
Actually, a lot of commentary that I have seen places the blame on Obama. He was gung ho during the campaign, even calling it a priority. When the bill was in trouble, the President was silent. Proponents of the bill feel abandoned by the President. Consider this. 12 Dems voted against the bill and 3 abstained. If all of the would have voted for the bill, you would have had 60 votes. You're kidding, right? Representing these entities everyday, I see the losses that will accrue down the road. The only reason that lenders are not doing these loan mods on their own is due to the mortgage backed securities. The banks are actually trustees for the investors that purchased these securities. If they agreed to a loan mod, they could have potential liability under their fiduciary responsibility. The loss incurred from a foreclosure does not bring this liability. Therefore, the trustee (bank) prefers foreclosure. A loss is still incurred. The same lenders that have written mortgages for somebody who had a foreclosure 3 years prior. Everybody wants to have the largest portfolio, whether they are performing loans or not. Except that the President abandoned the bill when he got his multi-billion dollar loan mod proposal through. Therefore, Obama wasn't trying to advance anything. He allowed his own party to kill it by not backing it. Your argument is a complete act of fail. Your complete lack of understanding regarding bankruptcy law, how the system works, and the true nature and depth of the foreclosure problem are astounding. Since you obviously haven't the first idea about how any of this works, your opinion is of little consequence. You might want to stop before you hurt yourself.
The loss from foreclosure and selling it as an REO is even worse. I have seen properties go in REO for less than half the principal balance in FL and CA. When you take out legal fees for bankruptcy attorneys, foreclosure attorneys and add in REO management company for winterization and care of the property and real estate agent's fees, they are getting 25cents on the dollar for some of these houses.
I forgot to include hazard/flood insurance(which is higher for non-occupied residences), property taxes. Many abandoned homes get broken into by drug dealers, and hookers. Other's get their heating/ac units and copper stolen by thieves. Foreclosure is very very expensive. The losses were minimized during the crazy mortgage boom, but they are huge in a flat or down market.
There are all kinds of costs (BPOs, etc) that the mortgage company will bear in a foreclosure situation. This also ignores the property taxes and HOA assessments when the servicer purchases the property at sale.
