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MORTGAGE MODIFICATION LAWMAKERS CONTINUE TO WORK ON CRAMDOWN LEGISLATION

MORTGAGE MODIFICATION LAWMAKERS CONTINUE TO WORK ON CRAMDOWN LEGISLATION

According to Congress Daily after weeks of negotiation, a compromise may have been reached which will give bankruptcy judges greater power to modify the primary mortgages of chapter 13 debtors. The Senate compromise would mandate that if a lender offered a modification through the Obama plan or a program included in last year’s housing bill, called the Hope for Homeowners Act, the homeowner would be ineligible to modify their loan through bankruptcy. At-risk low-income borrowers and those who pay less than 31 percent of their income for mortgage payments would be ineligible for principal reduction, but they could have their rates reduced or their loans amortized over a longer time. If the principal is reduced by a judge, the possible compromise would allow the lender and borrower to evenly split any profit up to the original amount of the loan if it is sold while the homeowner is still in bankruptcy. Only loans that originated before 2009 and amount to less than $729,750 could be modified in bankruptcy. The program would end in 2014.  These restrictions are going to leave a lot of individuals out in the cold.  Also, to save their homes from foreclosure, many individuals will have to file bankruptcy even though they will not be able to utilize the benefits of the legislation when and if it becomes law.

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