Sub-Prime Crisis Solutions?

     The House Judiciary Committee has approved proposed amendments to the bankruptcy laws that would allow Judges to re-write adjustable rate mortgages, in limited circumstances.

Commentators have discussed the proposed ways of meeting the tidal wave of foreclosures caused by the re-set in payments of millions of adjustable rate mortgages.

President Bush’s proposal is voluntary, and a very small percentage, about 3%, of affected homeowners will even qualify.

Would be President Clinton talks about freezing rates on all adjustable mortgages for five years.  That will not happen voluntarily, and I do not see how the Federal Government could legislate such a change without violating the Constitution.     Not to mention that, any proposal from a new President is more than a year from enactment.

The proposed bankruptcy law changes are right on target.

House Bill 3609, as approved by the House Judiciary Committee, covers only ARMs that are in foreclosure, that were taken out after January 1, 2000, and before the effective date of the bill.

It would allow Judges in Chapter 13 cases to modify adjustable rate mortgages to lower the balance to the value of the home, and change to a fixed market rate of interest.

The Center for Responsible Lending  estimates 600,000 homeowners could save their homes from foreclosure if this change is enacted.

People who are current on their payments, but can no longer get re-financed because of falling home prices and a changed mortgage market, who cannot afford the ARM payment when it comes off the teaser rate, could get relief.

Let your Representative and Senator know how you feel.

More foreclosed homes means more homes for sale means lower values for everyone’s home.