Promising New Mortgage Workout Plan in the Works

Hot off the wires: there is a bill pending that would help people facing foreclosures in their ability to work out  new mortgages. It would allow judges to authorize loan terms for primary residences after the owners have declared bankruptcy. This is a brilliant idea and in my opinion has the most potential of anything I have seen so far in the foreclosure assistance arena.

The argument against the bill is that many lenders would likely be hit hard. Not only would they lose the authority to negotiate new loans with lenders, but they could also be dragged into bankruptcy court by millions of defaulting borrowers. This would likely cause lenders to lose even more money than they would if they actually worked out the loans sitting on desks of thousands of loss mitigation department employees.

Naysayers insist that the bill would trickle down to new homebuyers via higher interest rates coupled with larger required down payments. This would obviously be a result of lenders making up for their losses by trying to prevent the same thing from happening in the future-the risk of a judge taking over their job would be great.

Those supporting the bill, including President Obama and most of the Democratic House and Senate members, feel this program would spare taxpayers money since it would be handled by the courts and not take money from bailout programs that earmark funds for mortgage modification programs. It would most likely prove to be much more efficient than individual lender workouts; for one because many lenders have way too many files to deal with and cannot dedicate the time needed to each borrower, and secondly because many lenders change policies and/or flat out change their minds in the middle of the loan modification process. Unfortunately as many people facing foreclosure know, it is a nightmare to attempt to deal with the lender.

If you are in the middle of attempting a workout with your lender, or if you forsee the need to do so in the future, hold onto your hats. If this new bill is passed there is no telling how quickly it may take effect. But if the new administration gives any indication hopefully it will help millions of homeowners in a more efficient way, allowing more people to stay in their homes.

For up to the minute updates on this and other pending legislation and program review, go to If you purchase my book on foreclosure options you will be able to access our update link, which provides constant updates on everything related to foreclosures and mortgage workout programs.

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