The King Amendment to the Helping Families Save Their Homes In Bankruptcy Act 2009

Yesterday, Chip Parker wrote a rather scathing blog on the King Amendment to the Helping Families Save Their Homes in Bankruptcy Act.  Chip’s comments came after researching the King Amendment and reading David Leibowitz’s blog analyzing the King Amendment on Mortgage Law Network.  The reason for the amendment is to protect individuals or companies from the ridiculous lending practices during the real estate bubble.  While I understand Chip’s comments and the reason for the amendment, I believe I see a positive outcome if the amendment becomes law.

Chip seemed outraged by the number of liar loans, no doc loans or whatever terminology that was being used to lend money irresponsibly, and I agree wholeheartedly.  There is no doubt that money was being thrown at real estate investors, first time homebuyers and anyone for that matter who found some dirt to purchase.  But, when it comes time to pay the piper, individuals are seeing skyrocketing unemployment and an economy on life support.  At the same time, the dirt that was once worth $200K is now worth $10K. The banks are unwilling to work with individuals seeking a modification of the terms of their loans.  So, many individuals are being forced to file bankruptcy, as they cannot meet their financial obligations.

This exact scenario happened to a client of mine.  National City Bank had her sign documents at the closing which were prepared by them and included some information, but certainly not all the information that my client provided to her mortgage broker.

Once she filed for bankruptcy, National City sued her and alleged all kinds of nasty things.  Ultimately, we were able to prove not only that National City was wrong, but that they should never have brought the lawsuit in the first place.  National City also agreed to pay my attorney’s fees as a result of the litigation.   You can read more about that here.

This is exactly where I see the King Amendment going if it ever becomes law.  A few mortgage companies will decide to file lawsuits.  What they will meet up with is an army of bankruptcy lawyers out for blood.  The mortgage companies have really ticked off many Bankruptcy Judges, District Court Judges and State Court Judges.  The case law coming out of these Courts is overwhelmingly unfavorable to the mortgage industry and will continue to be that way as more and more of their practices are exposed.

The same will be true in the Bankruptcy Courts if the King Amendment becomes law.  So, while I agree with Chip’s and David’s analysis of the King Amendment, I don’t see it as a negative, I see it as an opportunity to expose the industry at their own expense.

Related posts:

1. Helping Families Save Their Homes in Bankruptcy Act of 2009 – Fox Business Network Coverage
2. Helping Families Save Their Homes in Bankruptcy – Mortgage Loan Modifications For Homeowners in Chapter 13
3. Why Do So Many People And Organizations Support the “Helping Families Save Their Homes in Bankruptcy Act of 2009”?