Former Congressman Kemp Supports Bankruptcy Law Change

In today’s Los Angeles Times, Jack Kemp gives his support to the NACBA endorsed legislation to deal with the massive increase in foreclosures, as a result of the sub-prime mortgage crisis.

Consumer law attorneys have been calling for bankruptcy law reform for some time. The change allows the bankruptcy court to change the terms of a mortgage on a principal residence. Now, the court can only change the terms of a mortgage that is NOT on the home of the person filing bankruptcy.

This would allow people about to lose homes, that have gone down in value, because their ARM is adjusting and the payment is increasing to one they cannot afford.

I have heard the argument that this is not fair to the lender, to have the loan terms changed to lower the total amount they receive, and lower the interest rate, and the monthly payment. That the consumer will then get the benefit of the turnaround in the real estate market, when the value of the home goes back up.

No one can guarantee if, and when, that might happen.

But, mortgage companies who foreclose, do not rent out the homes, speculating when that home value might go back up, so they can sell and get back more of their money.

No, they let the home sit and deteriorate, to keep the loss off their books, and continue deceiving investors and others, or they sell it.

The new law would result in less loss to the mortgage company, because they would save the cost of foreclosure, and be paid the amount they would get from a foreclosure sale anyway.

Let your representatives know how you feel about this proposal.