Bankruptcy Law Changes for Mortgage Relief, & help for Veteran home-buyers is on the table in DC.

Tuesday March 4, 2008 the Senate will be debating a Bill that proposes changes in U.S. Bankruptcy code that would allow judges to reduce interest rates and alter what is owed on loans to homeowners facing escalating loan payments they cannot cover. The bill would also set aside $200 million to assist in foreclosure prevention counseling service, plus money for individual states to issue more tax-exempt bonds enabling housing authorities and agencies to aid homeowners with refinancing.

This bill is strongly opposed by lending institutions and by Republicans, but it's encouraging to know that the rescue mission is still struggling to keep families in their own homes and avoid foreclosure. Which we all know is bad for every American....on so many levels.

Another bill being considered is one that would fund a new federal government corporation with $20 billion to help homeowners refinance. The money would also be used to buy up distressed mortgages. Although I'm not sure I favor this sort of salvation for the lenders, who spent years raking in profits and created their own reality. But once again, if it helps cool the raging foreclosure fires and keep families in their homes.

The federal Office of Thrift Supervision (where have they been these past few years?) is putting forth a plan to give assistance to as many as 8 million homeowners with mortgages worth more than their home would sell for. These borrowers would refinance into government backed loans at the home's current value. The first lender would be given a special certificate to vouch that the difference could be claimed if and when the home sells at a higher price. In my opinion, while this plan might keep the homeowner in his or her home, it takes away from the wealth-building factor for property owners. And how would this look on a credit report? How long would it stay on a credit report, since is sounds like this could be a long-term debt?

Another about-time proposed change for VA home loans is being debated in Washington. Veterans at war, returning from war, those who are actively serving our country, or have finished their duty and want to own a home....all should have the right to purchase their own homes with the best possible terms and incentives. The VA has been successfully intervening for Vets who have been having trouble keeping up their home payments, but many more vets are still challenged in qualifying for their first home in a way that is safe, fair and affordable. These proposed VA loan enhancements include: Increasing VA loan limits to 150% of conforming loan limits in high cost areas; Easing the refinancing restrictions and requirements for Veterans; and offering permanent authorization for the guarantee of ARM's and hybrid loans. The VA also provides credit and home loan counseling for VA borrowers. I believe we owe this and more to our Veterans.

I have to say that I am pleased that Congress is continuing to look for ways to help borrowers in trouble. Perhaps there is no one answer to pull troubled borrowers out of the sub-prime mire. But maybe with a number of different plans we can find solutions, and set the housing market straight. You should actively encourage your elected officials to consider as many mortgage relief solutions as possible, through letters, emails and phone calls. Since our entire economy is affected by the mortgage mess....we are truly all in this together.

Published 2/29/08