Christie D. Arkovich, P.A.

On the horizon is a new piece of legislation "Helping Families Save Their Homes in Bankruptcy Act of 2009.  We also informally refer to this as the Cramdown legislation.  This new legislation will give bankruptcy judges, in Chapter 13 bankruptcies, the ability to modify first mortgages, or undersecured second mortgages and save homes.  It is expected that both principal and interest rates can be reduced under this law.  The bill HR 1106 passed the House but was voted down by the Senate.  In today's market where most home loans were securitized and are now owned by pools of investors, this cramdown legislation represents the best and perhaps only opportunity to require principal writedowns on first mortgages.  It will allow bankruptcy judges to do what servicers won't do:  reduce principal on underwater homes.  This bill needs your support.

You may wish to contact your Senator to urge them to re-introduce and pas this bill if you believe that it will help Americans keep their homes.  President Obama has expressed his desire for bankruptcy judges to be allowed to modify first mortgages on principal residences.  There is precedence for such a law.  Under current bankruptcy laws, judges are permitted to reduce the amount owed on an underwater vehicle if the debtor has owned the vehicle for over 910 days.  Also bankruptcy judges are allowed to reduce liens on second homes or investment properties, as well as strip off second mortgages or HELOCs if no equity exists in the home to partially or fully secure the liens.  So the real question is:  In what world does it make sense to strip liens off second homes and investment properties, but not be able to help homeowners modify principal and interest on first mortgages on their homesteads?  Mortgage servicers are clearly overburdened with modification requests and cannot timely respond to them all.  Servicers also suffer from conflicts of interest regarding payment to them, as well as having limited authority to represent the bank or securitized trust that now owns your mortgage.  Default servicing requirements whereby a lender tries to work with a borrower during the hard times is now hit or miss.  Giving this control to a bankruptcy judge we believe will help level the playing field, giving the homeowner some control that they presently lack and a timely answer to modification requests.