Patricia Nell Warren

The Bankruptcy Meatgrinder

Filed By Patricia Nell Warren | January 10, 2009 4:00 PM | comments

Filed in: Living
Tags: bankruptcy, consumer rights, loan modifications, mortgage

The following joint announcement hit the wires today from five consumer-rights groups: the National Association of Consumer Bankruptcy Attorneys, Center for Responsible Lending, National Consumer Law Center (on behalf of its low-income clients), Consumer Federation of America and Leadership Conference on Civil Rights. Their issue: a dire need for realistic government and lending-industry response to the worsening mortgage crisis.

Roughly half of the mortgage loans that got modified in 2008 are now back in foreclosure. (And without a doubt some of those loans are to LGBT people.) The government programs that have been launched so far are helping only a fraction of those who need help, according to experts I've talked to. When you call the HUD "help" number, you get a message machine that refers you to local organizations like ACORN. But Acorn, for instance, focuses mainly on low-income people. Homeowners with mortgages that are bigger than "low income" are getting the shaft right now.

Elizabeth Warren, debt expert who heads the Congressional panel on paying out the bailout, predicts that 1 in every 7 homeowners with mortgages will be in foreclosure by the end of 2009. One in seven! Does anybody in Washington smell the coffee burning? Do they hear the distant strains of "Twilight of the Gods"?

Says the group: "We welcome the support of Citigroup, one of the nation's largest mortgage lenders, for responsible and urgently needed legislation that would help stem America's grave home foreclosure crisis by allowing judges to modify mortgages in bankruptcy. It is painfully clear that the continuing, and indeed worsening, foreclosure crisis is perhaps the single largest impediment to economic recovery. It is encouraging to see a major financial industry player and Congress working together to do what is most effective to keep Americans in their homes and to get this economy back on its feet.

"We commend the efforts of Senators Durbin, Schumer and Dodd and Representatives Conyers and Miller, for reaching this agreement with Citigroup. This major breakthrough should alleviate any concerns about including this legislation in the economic recovery package now being developed by the incoming Obama administration and Congress. Now that a compromise is in hand, the time for action is now. We cannot afford to have the mortgage foreclosure crisis go on one day longer than is necessary as a millstone around the neck of our struggling economy."

Well, I think it's just peachy that Congress is finally awake enough to consider this legislation. Based on what I've seen in the last year, most lending-industry leaders are too stupid, greedy and mired in old MO's to think their way out of this one.

But why compel families and individuals to go all the way into the meatgrinder of bankruptcy before a judge modifies the home loan? Why can't more loans be modified before the train wreck happens...not after? Wouldn't that be a more sensible approach...a better, quicker, more humane way to rebuild the economy?

But when did "sensible" ever equal "cents" in American politics?


Further info:

Maureen Thompson, for National Association of Consumer Bankruptcy Attorneys, (703) 276-3251 or (703) 338-5679 and;

Nancy Zirkin, for Leadership Conference on Civil Rights, (202) 263-2880 and;

John Rao, for National Consumer Law Center (on behalf of its low income clients), (617) 542-8010 , ext. 319 and;

Kathleen Day, for Center for Responsible Lending, Day (202) 349-1871 (work) or (202) 253-4883 (cell) and

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I saw a story on local news about a $1.2 million house termed a "castle" that had gone into foreclosure. The asking price for it was $500-some thousand. That's depressing. Like many, my property was to have been my road to retirement "in style" and now it might just be part of the bankruptcy in a couple of years.

So what should one do in the meantime, give all your money and property to one's spouse (you know, the one we can't marry)? Then, I suppose the next step is to max out all of your credit cards and some of us still have great unused credit limits. Then, you donate that money or those purchases to friends, family, charities, significant, but nonlegal, partners and, of course, you keep enough funds for the bankruptcy attorneys.

Or, perhaps, the government will actually use some of the $700 billion and the $168+ billion to AIG, and the soon-to-be $1 trillion in stimulus to help home owners who have never been late on their mortgage payments actually stay in their home.

Ony 10 more days of the rotten Bush Administration. I do hope Obama and his team have better ideas and programs than this last bunch of crooks.

Robert Ganshorn Robert Ganshorn | January 11, 2009 2:22 AM

Patricia you are so right. Since the law changes in Bankruptcy (enacted by Republicans) it is a meat grinder that provides all the stigma of being bankrupt and greater financial penalties than ever.

The problem of the unemployment level has effected so many that one could have a mortgage with a zero interest rate and find it impossible. I wish the public (or myself) knew more about what was in the Obama economic stimulus program now being touted as the "no earmarks" bill, but we have to wait and gnash our teeth.

Bottom line of the bailout legislation should be to benefit the homeowner, even to the extent of the Treasury buying up mortgages and setting the lower terms to the homeowner. Take it out of the hands of Wall Street crooks like Citigroup. Citigroup's largest investor is Saudi Arabian prince Alwaleed bin Talal, richest man in the world with oil wells gushing daily. He needs our taxpayer bailout like we need to be at his country's holy site "Mecca" getting our heads chopped off for being gay.

We have an adjustable rate mortgage. Our credit has gone down since we got the mortgage (Bilerico doesn't pay much!). Any idea how to swap it for a fixed rate mortgage?

Bil, you can approach the loan-counseling department at your mortgage lender and inquire about what programs they have for a loan modification. Some lenders are being more helpful than others. A lot depends on how big your mortgage is.

There are also organizations like Hope Now and ACORN that can provide some guidance.