Congress Looking to Give More Power to Bankruptcy Courts
U.S. Representative William Delahunt says that bankrutpcy courts should get more power to modify the terms of “predatory loans”. With housing prices falling throughout the US, many people everywhere are struggling with high mortgage payments that now exceed the value of their house. Delahunt acknowledged that volunatry measures so far have been unable to slow down the onslaught of foreclosures popping up everywhere from Detroit to Orange County.
Bankruptcy judges may soon get a lot of latitude in restructuring primary mortgages during bankruptcy proceedings. Banks are faced with a tough choice, let the home go into foreclosure and find a new owner or negotiate with the existing owner. Often banks are fine letting the house go into foreclosure because they can quickly get a new tenant that will pay market rates on the loan. Lately banks have been more willing to work out a deal with existing homeowners because demand for purchasing new homes has been so low that it’s harder to finder someone to buy foreclosed properties.
I assume we will continue to see a concerted push to allow people who are filing for bankruptcy to negotiate the terms of their loan with the bank. In most cases it’s in their best interest to work something out, we’ll see if this starts to happen on a larger scale.
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