A Simple Plan To Prevent Foreclosures?

The Law Prohibits Bankruptcy Judges From Reducing Mortgage Payments; Could A Change Ease The Housing Crisis?

(CBS)  Before their kids were even born, Kevin and Sherrie Floyd laid the foundation for their future.

They bought a house 13 years ago and thought they'd never leave, CBS News correspondent Ben Tracy reports.

"We were doing fine but I got injured at work and that kind of set things back," Kevin said.

They refinanced, but payments on their adjustable-rate mortgage soon adjusted right out of reach.

The couple said their payments were $3,200 when they refinanced; Now their payment is $4,300.

Their lender refused to work with them. Facing foreclosure, the Floyds declared bankruptcy, hoping to work out a payment plan to save their home.

"I didn't want it to come to this but we had no choice," Kevin said.

Here's what's interesting: If the Floyds owed money on a yacht the bankruptcy judge could help ease those payments. If they had a vacation home - same thing.

But when it comes to your primary residence, home sweet home, federal law prohibits bankruptcy judges from changing your payments.

"Of all the things in the world they can change ... why not that?" said Sen. Dick Durbin, D-Ill.

Durbin says that giving judges that authority could prevent 600,000 foreclosures over the next two years.

"The group that is opposed to this, screaming bloody murder, is none other than the mortgage bankers," he said. "The same people who brought us the subprime mortgage mess."

"We think Sen. Durbin is off base on that comment," said David Kittle, head of the Mortgage Bankers Association.

Kittle says changing the law would drive up mortgage rates and increase bankruptcy filings.

"It is onerous legislation. It will harm consumers - all consumers going forward who want to buy single family homes," Kittle said.

So far, attempts to change the law have failed, but some lawmakers say they won't give up.

The Floyds are now trying to find a place to rent. But with their credit ruined, every application has been rejected.

"I just feel real bad about it. It really hurts to be honest with you," Kevin said.

With their home being auctioned off next month, the family of seven will need to build a new foundation.

[ann1233]

I wish this country would join together to solve this mortgage problem. We are spending too much time blaming each other. Everyone makes mistakes. Our own government can''t even work together to solve this problem. Something needs to be done know with foreclosures or we will all lose.

[kennedy7955]

Brokers should go to jail? Well if the committed fraud, yes. But the mortgage mess was not caused by brokers, the mess was caused by lenders offering products that were not viable.

Keep in mind these products were subprime loans! Poor credit, stated income, no income where the borrowers could not get approved for any other kind of loan. The options on subprime loans were typically a 220 ARM with a reasonable rate of say for example 6%. The fixed counterpart could be 4-8pts higher! Also, most brokers told the clients to fix their credit so they could refi into a better fixed rate loan in the future.

The products and the guidelines were offered bu the lenders. It was their responsibility to assure the products worked, that they made sense. This of course was not the case. Why? because they were lending other peoples money!

For those blaming the brokers, I assure you the bulk of the mortgage mess is with the lenders.

[suzieh2308]

"Kittle (who works for the Morgage Brokers of America) says changing the law would drive up mortgage rates and increase bankruptcy filings."
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No i think it would just cut into his profits that''s why he is upset about it. Banks and lenders are nothing but theifs and con artists. They are a business and they are still in business to make money not give it away or even lend it to hard working people without trying to screw them over. I am sick and tired of paying the bank penaltys and fees to hold MY MONEY! I am doing them a favor by using their business but as someone else on here said, if I overdraw my acct by .01 but have 20,000 in my savings account at the same bank, they charge me a $30+ fee! Even if i didnt have a savings acct this logic is so @$$backward - if i dont have enough money, why would u give me a fee, clearly i dont have any money to pay the fee and charging me more money because im broke is only going to make me broker - do anyone else seem the idiocrisy in this system???

[acolton1]

It''s sad when the bank will not work with you especially if you have never missed a payment and paid everything on time. Banks and Corporations Do Not Care about people all they care about is Money. That is why when you overdraft your checking account by .22 cents they charge you 34 dollars for overdraft fees. That is HIGHWAY ROBERY and completely uncalled for my bank did that and I SCREAMED at them and closed my account that I had for 12 years. Its all about the bottom line and charging people service fees and other fees that some VP thinks up to sock it to the little guy so they can by their 5th house on the gulf coast and 3 luxury SUV''s to fill the driveway. I try to pay cash for everything now and don''t live on credit, I guess that is why I still rent.

[rational_1]

Anyway a Realtor saw this home on the internet,and purchased it 5 states away,never saw it personally,just a picture.He paid $8,000 for this three bedroom ranch style home.Turned around and sold it within a week.He sold it for$65,000 in a blink of an eye she lost her home and that dude made a killing.This should never be allowed.
Posted by swwils at 07:19 AM : Apr 16, 2008

I see two people at fault in your story - the mother and son. She was naive (or perhaps overly optimistic) in trusting him to pay HER mortgage (still her responsibility no matter what oats she was sowing) and he was a schmuck for losing his mom''s house when she entrusted him with it. Props to the realtor for his business sense; I''d have done the same thing if given the opportunity. And why not? The bank would have sold it to someone else for a pittance if not him. So, your story didn''t exactly make me pity your mother-in-law because she should have known better and kept up on things that were ultimately her responsibility. And the son didn''t just ''slip up'' - the bank doesn''t come for your house if you''re a couple of days late on one payment.

[swwils]

They should not allow a family to loose their home ,so some banker can buy it then sell it at a great steal,and that is what it is.My Mother in law,she let her son and his family stay in her home while she was sewing oats in another state he was to make the $213.00 monthly mortgage payment,he fell behind,next they foreclosed on it.She lost her home of 30 plus yrs,because he slipped up.Anyway a Realtor saw this home on the internet,and purchased it 5 states away,never saw it personally,just a picture.He paid $8,000 for this three bedroom ranch style home.Turned around and sold it within a week.He sold it for$65,000 in a blink of an eye she lost her home and that dude made a killing.This should never be allowed.

[swwils]

I have a simple plan to save our homes.Instead of Uncle Sam bailing out Fannie Mae,or Bernie Mac,they should bailout the home owners personally.Take over your mortgages,at a lower interest rate than you originally signed for.The homeowners however must pay the Government back each month a fee equal to your intake,say your family brings in 2500$ a month then you pay 475.00$ for your house payment,also you must at the end of the year sign over your tax returns to the government,but you get to have your home at a much lower interest rate.I have calculated this and it will work for the working blue collar class of people.The upper middle class will of course make it difficult but it would also work for them of course all payments are a percentage of monthly intake.

[rational_1]

What amazes me is that so many people make the biggest purchase of their entire lives without much thought or education. How many of you know that many community colleges offer short courses (maybe 8-10 weeks, one evening a week) where you can learn all the ins and outs of buying a home? My wife and I took one before buying our first home and it was well worth the time and minimal cost (which we more than recouped in forcing our lender to drop junk fees in the loan application). If you haven''t yet done so, it might be worth your while to look into courses like this in your area. Or you could proceed blindly...

[downtowner97]

I picked the house, I signed the deal, then I was sent to the office of the lender in the same building as the realtor. I was assured I''d get a good deal. I was shown all the numbers, and they looked doable. Then, at the last minute, everything changed. I''d need to put more down, pay a higher rate, there''d be a pre-payment penalty for refininacing or selling, and the rate would climb dramatically after two years.

The two years is up July 1, so the "For Sale" sign will go up on June 1. I''ll sure miss the place, but I''m not going to work more hours than I already do to support a house I suppose I couldn''t afford in the first place. 20 days into an escrow isn''t the best time to make an unemotional decision about a mortgage. You are already packing, and it''s too late to talk to another lender.

[timdgrim]

There is one thing that this country has totally forgotten about. RESPONSABILITY!!!!!! And it should NOT be taken out on me or taken out of my check to bail these fools out of their stupidity!!


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Posted by ban-one1 at 08:03 PM : Apr 15, 2008
I guess they have also forgotten how to spell.(RESPONSABILITY!!!!!!) Stupidity huh!

[feddupp]

With all these people (FAMILIES!) losing their homes, hundreds of thousands of them, one has to wonder:
WHERE are all these people "going?" Are they living in HOMELESS shelters? Moving in with relatives? Living on the STREET? How are they LIVING without a home to stay in?

[Syndicate]

I''m still waiting for some brokers to go to jail. I think we should look at everybodies mortgage apps and see if people were really given the best loans they qualified for. If not the broker goes to jail for fraud. Isn''t that easy. Lets do this.

tjbanshee-Good Luck

shrimpety: I agree but I thnik some people were taken advantage of by the gate keepers. Sometimes I wonder if I got the best deal. Its hard to know.

[tjbanshee]

i lost my house last year like i said I lost my house, i knew what i was signing and did it anyways, and by the way ban-one1 i live in Idaho and make 75,000 a year i have a good job but i just made a bad choice. i live with it and i take full responsibility for it. i now rent a house and am saving a lot each month so i can buy again, whenever that could be, but i am young so i have time on my side

[shrimpety]

Why is it that nobody holds the people that agreed to these loans accountable for doing the math to figure out that at some point they may not be able to afford their home? When one agrees to a variable rate, they have to consider the worst case scenario first, then work backward to figure out it is really the best choice. A negative amortization loan is never a good idea - the word negative should have been a clue that it was a bad idea.