Thursday, February 26, 2009

Judges Modifying Mortgage Loans For Individuals in Bankruptycy?

CNBC reports:

Housing Bill Would Let Judges Erase Mortgage Debt

The U.S. House is expected to approve legislation Thursday that would let federal judges erase mortgage debt for homeowners who enter bankruptcy.

The bill will dovetail with President Barack Obama's housing market recovery plan announced last week and includes other provisions meant to aid struggling borrowers. The legislation will almost certainly pass the House, where Democrats have a healthy majority. The plan must then be paired with a companion plan that has not yet been introduced in the Senate.

Here are some details of the House plan:

Bankruptcy judges would be permitted to rewrite loan terms for homeowners who seek protection from their creditors in bankruptcy. For the first time, borrowers could have the courts erase some home loan balance and lower interest rates. The lending industry is trying to pare back the terms of this provision, and changes might be made before it becomes law.


Could this mean that rates may go up?

Would any investor invest their money in mortgage backed securities?

Would this cause less mortgages to be written?

What would a borrower have to do to qualify for a mortgage?

It will be interesting to see the final bill.

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