According to an article in the Star-Telegram, House Democrats have created a compromise bankruptcy bill that would allow mortgage modification in bankruptcy under the strictest circumstances, if approved by the House on Thursday.
The new language includes the following restrictions:
Debtors seeking mortgage modification in bankruptcy would need to prove that they attempted to modify their mortgage with the mortgage company. The homeowner's attempts would need to go beyond a letter or phone call. Homeowners would be required to prove that they provided their financial documents to their lenders.
- Bankruptcy judges would be required to determine if homeowners were offered a "qualified" loan modification with monthly payments equal to one-third of the homeowner's income.
- Bankruptcy judges would be required to deny mortgage modifications to homeowners who could afford their loans.
Let's deal with reality here. How many homeowners can even get their mortgage company on the phone let alone get financial records to them? How many homeowners can even locate information about how to contact those who are responsible for creating loan modifications? Many homeowners are literally jumping through hoops and rings of fire just to get their mortgage company to respond to a phone call or letter.
Furthermore, how exactly will homeowners prove that they sent their financial documents to the mortgage lender? How do you prove something like that? All the most unscrupulous mortgage lenders need to do now is simply avoid these homeowners facing foreclosure . Before this bill is approved maybe we should add language that requires the mortgage lender to respond to homeowner's inquiries within 30 days. We can't just put all of the risk and responsibility onto the shoulders of the homeowners. This is truly the case of David and Goliath.