For nearly a year, American lawmakers have been struggling to find creative ways to curb the amount of foreclosures that are over taking the country. One such act would be to allow struggling home owners the simple act of being able to refinance their loans more easily, but unfortunately that has not been an easy battle. To force the hand of the lenders to require them to work with borrowers, steps have been made by Congress to allow bankruptcy courts to modify mortgage loans.
Despite previous efforts from the government to stop the amount of foreclosures through the “Hope for Homeowners” program put into effect under the Bush administration, the problem has actually accelerated. The Attorney General believed that by changing the Bankruptcy Code millions of homeowners would be properly assisted and able to keep their homes.
Admittedly, this bankruptcy court ordered loan modification suggestion requires a compromise from the involved parties. Both the homeowners and mortgage investors would share the losses distributed by the courts rulings. With the investor taking the hit at losing the outstanding principal exceeding the value of the home.
Many banks were against the ability for bankruptcy courts to order loan modifications as they think the mortgage rates would spike in direct relatoin to this action. However, no concrete data has been provided by either party regarding what the estimated mortgage rate interest would be. Despite their objections the U.S. House Approved the mortgage bankruptcy measure in late January, 2009. Only time will tell what the ultimate affect of this decision will be.