Estimate of Number of Homeowners Who Could Save Home Based on Publicly Available Data from Center for Responsible Lending; Rep. Giffords Urged to Support Pending Bills to Eliminate Unfairness in Mortgage Foreclosure Process
TUCSON, Ariz., Nov. 26 /PRNewswire-USNewswire/ — There is promising news today for distressed homeowners in the Tucson-Sierra Vista area. The National Association of Consumer Bankruptcy Attorneys (NACBA) is estimating that Congresswoman Gabrielle Giffords can give 1,073 homeowners in her Congressional District a fighting chance to save their homes from foreclosure during the current mortgage crisis.
The NACBA analysis is based on publicly available data from the nonprofit Center for Responsible Lending, which has forecast that approximately 2 million American homeowners are currently on track to lose their homes to foreclosure. CRL estimates that roughly a third of those homeowners — 600,000 — could save their homes if Congress takes steps to address unfair mortgage foreclosure rules under H.R. 3609, which is now pending before Congress.
In Congresswoman Gabrielle Giffords' district, there are an estimated 13,696 subprime mortgages of which about 2,901 are expected to go into foreclosure. Applying CRL's data on the number of homes that can be saved nationally if Congress acts to end mortgage foreclosure unfairness, that means an estimated 1,073 homes in Congresswoman Giffords' district could be spared from foreclosure. For complete mortgage foreclosure impact estimates by Congressional District, go to http://www.nacba.org on the Web.
Philadelphia bankruptcy attorney and NACBA President Henry Sommer said: “Far too many American families are on the brink today of losing their homes due to predatory lending practices, declining real estate markets and adjustable rate mortgages (ARMs) that are due to reset to unaffordable rates. H.R. 3609 would help these families by giving them more flexibility to restructure in bankruptcy the mortgages on their primary residences. The bill would fix an odd quirk in current bankruptcy law. Amazingly, bankruptcy courts today can modify loans on vacation homes, cars, boats, and investment properties, but not on a primary residence. This is a major factor leading to foreclosure and it should be addressed now as a simple matter of fairness.”
For the perspective of a local bankruptcy attorney on this important matter, please contact Ailis Aaron Wolf at (703) 276-3265 or aaaron (at) hastingsgroup (dot) com.
UNDERSTANDING THE FORECLOSURE FAIRNESS ISSUE
As the housing markets begin to correct from the aggressive lending practices of recent years, approximately 2 million families face the prospect of foreclosure in the coming years, according to the Center for Responsible Lending. Foreclosures cost financial institutions money, depress neighborhoods, and throw families out on the street. While a few lenders have initiated practices that will help families restructure their loans to keep them affordable, many other families will not receive the individual assistance they require before they face the real possibility of losing their homes to foreclosure.
The Emergency HOME Protection Act, sponsored by Reps. Brad Miller and Linda Sanchez, will allow these families, as a last resort, to file for Chapter 13 bankruptcy and work with a bankruptcy judge and the lender to attempt to modify the mortgage such that banks continue to profit while families make affordable payments on the home loan.
Today, virtually all types of personal debt (including mortgages on vacation homes and family farms) can be restructured in bankruptcy, except for mortgages on a primary residence. This is because of a provision in the Bankruptcy Code dating to 1978, when most mortgages were stable 30-year fixed rate loans requiring a significant down payment. The mortgage market has changed considerably since then, and this bill would help the bankruptcy code catch up.
There is no evidence that the cost or availability of credit for mortgages on primary residences was negatively impacted in those jurisdictions whose courts, prior to a contrary Supreme Court case, allowed mortgage modifications, as compared with jurisdictions that did not allow these modifications. For over 30 years bankruptcy courts have been modifying mortgage loans on family farms in chapter 12, commercial real estate in chapter 11, vacation homes, multifamily properties, and investor properties in chapter 13, with no ill effects on credit in those submarkets.
Although many lenders state that they are working to proactively help families who pose high risks for delinquency and foreclosure, Moody's Investors Service reports that only 1% of the loans about to reset that are serviced by 16 of the top subprime loan servicers have been modified so far this year. In addition, many smaller lenders with fewer resources and less expertise are not even attempting to reach these families. Given the huge wave of potential foreclosures on the horizon, a large number of families will inevitably not receive the kind of individual assistance that is required to restructure loans to meet unique family circumstances. It is these families that H.R. 3609 would assist.
H.R. 3609 is supported by ACORN, the Center for Responsible Lending, Consumer Action, Consumer Federation of America, Leadership Conference on Civil Rights, National Association of Consumer Bankruptcy Attorneys, National Bankruptcy Conference, National Community Reinvestment Coalition, National Consumer Law Center, National Council of La Raza, National Neighborworks Association, National Women's Law Center, Rainbow PUSH, U.S. PIRG and many other groups.
The National Association of Consumer Bankruptcy Attorneys (http://www.nacba.org) is the only national organization dedicated to serving the needs of consumer bankruptcy attorneys and protecting the rights of consumer debtors in bankruptcy. Formed in 1992, NACBA now has more than 2500 members located in all 50 states and Puerto Rico.
SOURCE National Association of Consumer Bankruptcy Attorneys, Washington, DC
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