A monthly report (PDF) by the Congressional Oversight Panel watching the financial industry bailout says the Obama Administration's housing rescue plan has good points, but could do more to help homeowners. The COP is monitoring how well the government implements the Troubled Asset Relief Program, the bailout launched last fall in response to the failure of several major financial institutions and the subsequent financial crisis. Its newest monthly report, issued March 6, focuses on initial successes and failures of the retooled plan, which the Obama Administration modified to provide more help for homeowners caught in the financial crisis.
The report gives the housing plan points for making progress, but says it could do more to make a big difference. The administration's plan was praised for expanding access to mortgage refinancing through Fannie Mae and Freddie Mac, which could help an estimated 5 million homeowners, and for giving lenders financial incentives to allow loan modifications. However, the COP still saw substantial flaws. Chief among these was the lack of a "safe harbor" for loan servicers involved in loan modifications, who resist workouts because they are afraid of being sued by investors in mortgage-backed securities.
The report also called for laws allowing bankruptcy judges to "cram down" loans, or reduce the value of the loans' principal, for "underwater" homeowners who are in Chapter 13 bankruptcy. This is a very important provision to Buena Park loan modification attorneys because the vast majority of Southern California homeowners who need this help are deep "underwater" -- they owe substantially more than their homes are worth. The plan limits mortgage loan modifications to loans that are 105% of the home's current value, a provision intended to leave real estate investors out of the plan. But because home values in Southern California are so high to start with, many honest homeowners are underwater by far more than 105%, leaving them with few refinancing options. Orange County loan modification lawyers like us hope that a threat of cramdown in bankruptcy will give banks a motive to renegotiate now.
As we have written here before, Congress is currently considering legislation on cramdowns; Reuters notes that it is also considering a safe harbor provision for mortgage servicers. As Hawaiian Gardens loan modification attorneys, we hope those bills pass. They would give us powerful new tools in our work with struggling homeowners, helping them restructure their mortgages in a way that lowers payments to a livable amount and helps them avoid default. If you or someone you care about is in this situation, we can help. To set up a free, confidential consultation on your case, please contact us online today or call us toll-free at 1-800-872-5925.