H.R. 200 would amend title 11 of the United States Code with respect to modification of certain mortgages on principal residences.
Detailed Summary
Helping Families Save their Homes in Bankruptcy Act of 2009 - (Sec. 1) Amends federal bankruptcy law governing a Chapter 13 debtor (adjustment of debts of an individual with regular income). Excludes from computation of debts the secured or unsecured portions of: (1) debts secured by the debtor's principal residence if the current value of that residence is less than the secured debt limit; or (2) debts secured or formerly secured by a debtor's principal residence that was either sold in foreclosure or surrendered to the creditor if the current value of such real property is less than the secured debt limit.
(Sec. 2) Declares the credit counseling requirement inapplicable to a Chapter 13 debtor who certifies that he or she has received notice that the holder of a claim secured by the debtor's principal residence may commence a foreclosure on the debtor's principal residence.
(Sec. 3) Requires the court to disallow a claim for a loan secured by a security interest in the debtor's principal residence that is subject to remedy for damages or rescission due to violations of the Truth in Lending Act, notwithstanding prior entry of a foreclosure judgment. Prohibits construction of such disallowance to modify, impair, or supersede any other right of the debtor.
(Sec. 4) Allows modification of claim holders' rights in connection with a foreclosure notice for a chapter 13 debtor whose loan originated before the effective date of this Act. Allows changing an adjustable rate of interest to a fixed rate, and extending the repayment period.
Prescribes conditions for reducing a claim under this Act if the debtor receives net proceeds from the sale of the principal residence before receiving a discharge in bankruptcy.
Establishes requirements for modification of other kinds of claims for a loan secured by a security interest in the debtor's principal residence.
(Sec. 5) Denies debtor liability for certain fees and charges incurred while the bankruptcy case is pending and arising from a debt secured by the debtor's principal residence, unless the claim holder observes specified requirements.
(Sec. 6) Adds to conditions for court confirmation of a plan in bankruptcy that: (1) the holder of a claim for a loan secured by the debtor's principal residence retain the lien securing the claim until the later of the payment of such claim as reduced and modified or the discharge of a debtor from all debts; and (2) the plan modifies the claim in good faith and the court finds that the debtor did not obtain the modified claim by the debtor's material misrepresentation, false pretenses, or actual fraud.
(Sec. 7) Excludes from final discharge of a debtor from all debts: (1) any payments to claim holders whose rights are modified under this Act; and (2) any unpaid portion of a claim as reduced.
(Sec. 8) Prohibits the construction of this Act to modify any obligation of the Federal Housing Administration (FHA), the Veterans Administration (VA), or the Department of Agriculture under a contract that guarantees or insures payment of a loan secured by a security interest in a principal residence.
Status of the Legislation
Latest Major Action: 2/24/2009: Placed on the Union Calendar, Calendar No. 7.
Points in Favor
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Points Against
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Visitor Comments
Ralph Wheatly
January 29, 2009, 2:48pm (report abuse)I fail to understand how a one time reduction in principal balance and interest rate, favorable to the borrower at the expense of the lender, with the borrower receiving 100% of later appreciation in value, is going to be an incentive for any lender to make new home loans. All this will do is assure only the federal governement will be the ulitmate home lender unless borrower put down 20% or more of the purchase price. At a minimum, any reduction in interest or reduction in payments should be of limited duration and there should be some sharing of post-reduction appreciation in value.
lee
January 29, 2009, 5:21pm (report abuse)I built a home and after construction refinaced. My home valued at 1.4 million has dropped to $550k. So what? The broker falsified documents, backdated the three day right of rescission and I ended up with a Pay Option Arm that goes negative every month. I'm the victim. Not the lender. Any bill that forces the lender to the negotiation table to correct predadtory lending practices I'm for.
Darin
January 30, 2009, 9:05am (report abuse)Of course, everyone wants housing prices to stabilize and the economic crisis to end, but this well-intentioned legislation would have the unintended consequence of doing the exact opposite. In order to minimize risks, lenders will either make credit standards more rigid and therefore become very selective, or will raise interest rates for the entire system and have everyone subsidize the additional costs. In either scenario, demand for new homes will decline.
Jim
January 31, 2009, 8:29am (report abuse)Old claims for the effects on future home prices and interest rates. With the losses due to foreclosures and the lesser value for the REOs the future interest rates for homes would go up because of these losses regardless. Why would not allowing loan modifications for the duration of the loans not prevent greater losses than foreclosures will cause?
Also as point, the deficient portion of the renegotiated loans does not go away. It just becomes unsecured debt that would be paid back at zero percent to 100% depending on the debtors financial capabilities.
The limited duration is a no go since these loans that are the major problem were originated with far less than ethical terms for payment. The unethical portion of these contracts is what is being modified into fixed rate loans at conventional rates and with a modest risk premium. A good deal all around in my view.
Glenn Calsada, Esq.
February 2, 2009, 6:16pm (report abuse)The bankruptcy judge will not simply wipe out the unsecured portion of the debt. A Chapter 13 debtor must pay all into the plan all his disposable income for up to 5 years. During this plan payment period, any sale or refinancing of the property must be approved by the judge. The judge can then condition the sale or refinance upon payment to the first of at minimum the secured portion of the debt and may require a significant payment on the unsecured portion, if the debtor wants an early discharge. At present, the Bankruptcy law allows for strip downs on cars, boats and vacation homes and (since '97) strip offs of 2nd mortgages on homes (In re Lam). The proposed charges are needed to help fix what the mortgage industry caused. Lehman Brothers, Citibank, Countrywide, IndyMac etc. are all well aware of this fact. It is highly probable foreclosures will stabilize and lending will become safer, not riskier, as a result of the change. People actually want to keep their homes.
Jim
February 4, 2009, 8:38pm (report abuse)Glenn,
I agree with most of what you say about housing and chapter 13. The secured car loans require full payment because of a law referred to as 910, (2.5 years)
Allowing judges the ability to modify the home loans is far more important than the 2005 BAPCPA fiasco which messes up car loans.
The loans will be safer since lenders will now have no protection against marketing loans to people that lead to overall insolvency.
The last action on this bill was awhile back. Did Congress go home already?
Passing this legislation would do more to give incentive to servicers and lenders to actually modify loans instead of stalling them into foreclosure.
Also it would help those in chapter 13 plans to meet the five year obligation of all disposable income would go to pay off the unsecured portion of the debt alongside the other unsecured creditors.
shelly
February 8, 2009, 9:35am (report abuse)Why are the banks letting it come to this. As a homeowner, I have found myself in a situation I have tryed and tryed to get the bank to work with me. Information they have does not match mine. Lived in same home for 15yrs, FIRST time ever fell behind. Cannot even get to a supervisor. I have sent notorized bank statements and letters and these are still ignored??? Allowing a Judge the ability to help me modify my loan, sounds like a gift from God. Maybe these banks will actually try to work with customers. What are they waiting for.....can't wait for this to pass.
Jim
February 9, 2009, 7:15am (report abuse)Shelly, I wonder what the delay is also. The reason for the delay pre-november 2008 was an unwilling Administration and a marginal majority in Congress for the 110th Congress. HR 3609 was stalled back from late 2007. Now on Feb 9th 2009 the legislation was introduced in January but put aside for HR 1 which does not even address the problem causing our economy from faltering.
Many that have attempted to work with modifying their loans realize that it is not an easily obtained and sometimes only a stalling tactic to collect fees before foreclosure. Without allowing judges the ability to modify the loans, lenders/servicers will continue to fade our municipalities and economy along with the major problem of displacing homeowners from their places to raise families.
Jim
February 10, 2009, 5:33pm (report abuse)As a note, I heard that some amendments are being proposed which would disadvantage homeowners but keep lenders in the clear on some stated income loans.
Most loans are not stated I imagine and if they were, no amendment needs added if the income still was not enough to afford the home with a modification.
The clowns in DC always muddy legislation to the point of ineffectiveness. Laws should be written to serve a purpose and not canceled by amendments.
Glenn Calsada, Esq.
February 10, 2009, 8:48pm (report abuse)Recently, I read a bankruptcy judge's opinion denying a "stated income" lender an exception to discharge based on the borrower's fraud in obtaining the loan. The judge ruled that the lender in that case never bothered to verify the borrower's income and relied solely on the home's equity in deciding to lend. In this sense, a fraud exception from the cram down provisions would be a windfall for "no doc" or "low doc" lenders who relied primarily on the home's equity in their lending decisions. In any event, the adjustable rates mortgages were never tied to the borrower's income at the time of the loan transaction and that is often the cause for an inability to pay. I would venture to say that little to no "first payment default" borrowers are left anyway, having lost their homes to foreclosure by now.
Jim
February 11, 2009, 6:41am (report abuse)I agree that most of the loans which were based on income that did not exist initially already have failed and losses were already accounted for.
Most of the loans which people are having trouble with now are after reset increases which usually amount to many hundreds of dollar increases which overshoot the person's income capability. Interesting account for the BK judges decision related to the stated income loan.
cline
February 18, 2009, 6:31am (report abuse)thank god! Lets get this bill pass and change foreclosures into performing loans!
Shelly
February 18, 2009, 7:07pm (report abuse)I will believe the modifications when i see them....Like I said before I have been trying for 4 months to get my loan info straightened out. I don't believe these banks will modify the loans like they should and people will be forced into chpt 13 bankruptcy like myself. I would wish this upon no one...Letters to 3 state reps. and no response...hopefully a judge will be able to help me. Can it get any worse?
jeff
February 20, 2009, 6:44pm (report abuse)The reality is the lenders do not want a judge to see these inproper truth in lending abuses, when the judges see this .law suits , could very well take place
Terrence
February 24, 2009, 8:18pm (report abuse)The bill needs to pass! Most homeowners who unfortunately purchased at the wrong time during a solid market now have no options (unless they were speculators) whom cashed in.
The reality is that most folks are beyond 5% UPSIDE down and if you happen to be on an INTEREST ONLY loan, you'll never get out of the problem; hence when the loan reset after the fixed period, such as 5-10 years, the loan would end up in default anyways, because the lending guidelines of 80% LTV won't be met, the value may have subsided some, but the RESET will still happen!
LETS GET THIS BILL PASSED AND MOVE ON WITH OUR LOSSES BESIDES JUST THE BANKS GETTING OUR FUNDS!!!
Jim
(logged in user) February 25, 2009, 8:04pm (report abuse)HR 1106 will be addressed the 26th in the house. It contains HR 200 without the King flaw and also addresses a few other homeowner help measures which should help those trying to get modifications through their servicer. A safe Harbor for the servicers should give no excuses why servicers cannot modify the loan terms since they will be protected from investor lawsuits.
Lar
February 27, 2009, 12:07pm (report abuse)Plain and simple... Pass this Bill ! Lets give families a real reason to save their homes and get this economy back and running. The sooner we fix these problems...the sooner we get out of them. Doing nothing gets nothing done !
thomas alund
February 28, 2009, 12:09pm (report abuse)the banks will sill earn interest on this bill. No one is telling them to not make any money off the loan.All this bill is saying is, that the homeowner is going to pay back the loan with a reasonable amount of interest.Only greed would be a motive for them to be against this! Doesn't anyone else agree with this?
Sabrina
February 28, 2009, 3:26pm (report abuse)For so many families in California, like mine, impacted by the resetting of loans, the devaluation of family homes by 50%, and throw in a job loss or some other family crisis, chpater 13 is the ONLY viable choice to retain family homes.
PASS THIS BILL!!
I hope and pray for enough support for this to be passed soon....
shelly
(logged in user) March 2, 2009, 8:12pm (report abuse)Sabrina, I totally agree and hope it will be this week. Does anyone know for sure? I am following so many diffrent blogs I have no idea when they are suppose to vote
Jim
(logged in user) March 3, 2009, 7:16am (report abuse)I agree with you Thomas that this bill does not reduce profitability of the repayment of the loans. It simply reduces the negative impact that those who feel that contractual conditions outweigh the basic true meaning of the country. The aim is to promote a better life for many to obtain from hard work. Not reward those who simply intended to rake in excessive profits off the backs of Americans. A fair loan which provides cash flow instead of a failing loan which clogs out courts with judgments, foreclosures, lob losses and the collapse of world economies could be reversed by allowing Americans to pay fair prices back to recover principal and also bring back reasonable interest returns.
Monica MacGregor
March 3, 2009, 3:41pm (report abuse)I hope this bill passes. It would a dream come true for me. Does anybody know where it stands now.
Jim
(logged in user) March 5, 2009, 11:45pm (report abuse)Right now another bill HR 1106 is being pushed through congress. The initial legislation is pretty much as this bill except it also has incentives for servicers regarding protection from investor lawsuits along with partial payments to lenders for modified loans to offset the reduction. The negative thing about the new bill is an ammendment 1 which adds all sorts of obstacles to the bill. It is proposed by the author of this bill. It is similar in disabling true kelp as this bill is with the ing amendment. If it passes, you will have to prove that you attempted to unsuccessfully pursue a modification with your present lender at least 30 days before filing. Additional obstacles are also proposed by the diluting amendment.
Sydney
March 6, 2009, 5:08am (report abuse)Yeah, i am I agree with you Thomas that this bill does not reduce profitability of the repayment of the loans. It simply reduces the negative impact that those who feel that contractual conditions outweigh the basic true meaning of the country. The aim is to promote a better life for many to obtain from hard work. Not reward those who simply intended to rake in excessive profits off the backs of Americans. A fair loan which provides cash flow instead of a failing loan which clogs out courts with judgments, foreclosures, lob losses and the collapse of world economies could be reversed by allowing Americans to pay fair prices back to recover principal and also bring back reasonable interest returns. Great post i look forward to reading more
Sydney
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Dana - MN
March 31, 2009, 1:33pm (report abuse)In September of 2008, I proposed a very simple solution to state and national government 'officials' that would have:
1) Elimated need for much of the current legislation
2) Reduced the speed and amount home price reductions
3) Reduced the amount of money banks have tied up in fear and reserves
4) Reduced the number of people entering foreclosure
5) Elimated the need for much of or all of the mortgage related bail out money being thrown away to all of the short sighted and mismanged lenders
6) Reduced the need for government intervention in the housing market
7) Encouraged and make possible more new loans
8) Relax underwriting guidelines to allow borrowers that qualify for repayment to actually obtain loans
Neither Republicans or Democrats wanted anything to do with it.
Democrats slowest in responding or in the case of MN Rep Jeremy Kahlin, did not respond to my dozen attempts to contact him.
Dana - MN
March 31, 2009, 1:35pm (report abuse)How do we the people protect our homes values from lenders that are dumping inventory at 50% of the price they told us it was worth not 3 years ago?
I have only purchase money into my home. I pulled nothing out of it, the banks are shorting my value and being reimbursed for this irresponsible action at my expense!
H.R. 200 better pass WITHOUT excessive compromise or you Americans that defend the corperate protectionism are bigger idiots than the French have indicated, think about it!
Jim C
March 31, 2009, 9:09pm (report abuse)The only thing that needs to be done is to remove the exception which unduly allows privilege to lenders making bad and predatory loans which are not modifiable at present. There is no benefit in watering down this legislation into ineffectiveness by adding undue complications and exceptions to a law which could have been simply accomplished by removing the exception that is presently leading to unmodifiable loans and the great amount of foreclosures.