TITLE I - Authorizing the Treasury Department to Buy Mortgage-Related Assets
Sec. 11. Minimizing foreclosures. (6 Comments)
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SPECIAL RULES FOR MODIFICATION OF LOANS SECURED BY RESIDENCES.
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IN GENERAL.Section 1322(b) of title 11, United States Code, is amended
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in paragraph (10), by striking "and" at the end;
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by redesignating paragraph (11) as paragraph (12); and
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by inserting after paragraph (10) the following:
"(11) notwithstanding paragraph (2) and otherwise applicable nonbankruptcy law
"(A) modify an allowed secured claim for a debt secured by the principal residence of the debtor, as described in subparagraph (B), if, after deduction from the debtors current monthly income of the expenses permitted for debtors described in section 1325(b)(3) of this title (other than amounts contractually due to creditors holding such allowed secured claims and additional payments necessary to maintain possession of that residence), the debtor has insufficient remaining income to retain possession of the residence by curing a default and maintaining payments while the case is pending, as provided under paragraph (5); and
"(B) provide for payment of such claim
"(i) in an amount equal to the amount of the allowed secured claim;
"(ii) for a period that is not longer than 40 years; and
"(iii) at a rate of interest accruing after such date calculated at a fixed annual percentage rate, in an amount equal to the most recently published annual yield on conventional mortgages published by the Board of Governors of the Federal Reserve System, as of the applicable time set forth in the rules of the Board, plus a reasonable premium for risk; and".
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CONFORMING AMENDMENT.Section 1325(a)(5) of title 11, United States Code, is amended by inserting before "with respect" the following: "except as otherwise provided in section 1322(b)(11) of this title,".
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WAIVER OF COUNSELING REQUIREMENT WHEN HOMES ARE IN FORECLOSURE.Section 109(h) of title 11, United States Code, is amended by adding at the end the following:
"(5) Paragraph (1) shall not apply with respect to a debtor who files with the court a certification that a foreclosure sale of the debtors principal residence has been scheduled.".
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COMBATING EXCESSIVE FEES.Section 1322(c) of title 11, the United States Code, is amended (1) in paragraph (1), by striking "and" at the end; (2) in paragraph (2), by striking the period at the end and inserting a semicolon; and (3) by adding at the end the following:
"(3) the plan need not provide for the payment of, and the debtor, the debtors property, and property of the debtors estate shall not be liable for, any fee, cost, or charge, notwithstanding section 506(b), that arises in connection with a claim secured by the debtors principal residence, if the event that gives rise to such fee, cost, or charge occurs while the case is pending but before the discharge order, except to the extent that
"(A) notice of such fees, costs, or charges is filed with the court, and served on the debtor and the trustee, before the expiration of the earlier of
"(i) 1 year after the event that gives rise to such fee, cost, or charge occurs; or
"(ii) 60 days before the closing of the case; and
"(B) such fees, costs, or charges are lawful, reasonable, and provided for in the agreement under which such claim or security interest arose;
"(4) the failure of a party to give notice described in paragraph (3) shall be deemed a waiver of any claim for fees, costs, or charges described in paragraph (3) for all purposes, and any attempt to collect such fees, costs, or charges shall constitute a violation of section 524(a)(2) of this title or, if the violation occurs before the date of discharge, of section 362(a) of this title; and
"(5) a plan may provide for the waiver of any prepayment penalty on a claim secured by the principal residence of the debtor.".
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APPLICATION OF AMENDMENTS.The amendments made to title 11, United States Code, by this section shall apply with respect to cases commenced under that title 11 on or after the date of enactment of this Act, or pending on the date of enactment of this Act.
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HOPE FOR HOMEOWNER AMENDMENTS.Section 257(e) of the National Housing Act (12 U.S.C. 1715z-23(e)) is amended
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in paragraph (1)(B), by inserting before "a ratio" the following: ", or thereafter is likely to have, due to the terms of the mortgage being reset,"; and
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in paragraph (2)(B), by inserting before the period at the end "(or such higher percentage as the Board determines, in the discretion of the Board)".
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6 comments on Sec. 11. Minimizing foreclosures.
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I can't translate into "bill-ese" -- But as a policy matter, I don't like the idea of having to go bankrupt to get mortgage relief, and I don't like the picture of the courts handling what will be many, many cases as onesies and twosies, as the bill contemplates.
posted by lambert strether (Corrente) at September 22, 2008
I IMPLORE Senator Dodd to look into HOLC, the New Deal approach to an equivalent problem, which left people in their homes, cleaned up the bank's balance sheets, and made the government a profit by the time it closed down. -
Notification to the debtor within 1 year ...of improper loan generation papers, Lost papers , or other general stupidity... With the intention of the debtor being able to leave he contract since it is now unenforcable.
posted by Charles Anderson at September 22, 2008 -
I think this should be the most important provision of the bill - throwing money at CDO's and other worthless securities doesn't do nearly as much for the overall economic health of this country as a plan that helps individual homeowners re-negotiate their mortgages, both interest rate and principal. Couple this with money to local jurisdictions to get people in foreclosed homes and we would be talking about money well spent.
posted by James Maynard at September 23, 2008
Requiring bankruptcy to modify the terms of such mortgages only encourages further economic decline of "main street." -
http://francislholland.blogspot.com
posted by The Francis L. Holland Blog at September 23, 2008
The protections for homeowners above are too weak. Homeowners should not be liable in bankruptcy court or otherwise for any abusive, unusual, punitive or otherwise costly fees that increase the amount that the debtor is obligated to pay in order to be free of the mortgage, and these fees should be excised from the amount owing going back to the beginning of the mortgage, not merely to the beginning of the bankruptcy proceeding.
There ought to be a moratorium on foreclosures on the principal home or a home where a family member lives (student at college) until the economy has stabilized and restructuring of debt is possible in a normal financial environment, on normal terms, with credit freely available.
Homeowners should be able to request the intervention of the bankruptcy court at any time, to restructure any and all parts of the mortgage debt, and particularly those that are based on fraudulent information or terms, excessive leveraging, unconscionable terms in the broadest and most consumer-oriented sense of the expression. Loan agreements and terms that would not have been advised by a conservative consumer-oriented credit counselor should be considered presumptively invalid. All mortgages whose payment was premised upon the appreciation of the property should be liberally reformed or rescinded.
All adjustable rate mortgages and balloon mortgages should be considered presumptively reformable.
There ought to be a presumption in favor of reformation or rescission of mortgages upon the primary residence of debtors and family members, particularly where they can make a facial showing that fraudulent or inadvisable practices in the application process by any party of which the lender and agents were aware or could have been aware after a diligent review by the lender. -
Debtors who misrepresented income or employment should not be eligible for any government program. In addition, only the primary residence of the borrower should be eligible.
posted by Mark Mecum at September 26, 2008 -
Placing the debtor in bankruptcy before any mortgage relief stinks to high heaven. It wouldn't have stunk so bad if the bankruptcy laws were not revised, making bankruptcy harder and providing less relief in 2005.
posted by Craig Bryant, Citizen at September 28, 2008
April 21, 2005--President Bush signed the controversial 500-page Bankruptcy Abuse Prevention and Consumer Protection Act into law on Wednesday. The new law, which will go into effect in six months, will force more debtors to pay back creditors through court-enforced payment plans rather than have their debts erased like they are under the current system.