The Vida Law firm PLLC

The U.S. Senate gave a thumb down to bankruptcy judges adjusting mortgage terms to help borrowers avoid foreclosure.   This is a victory for banks and credit unions that said the legislation would increase loan costs.  The vote count was 51-45, with 12 Democrats being part of the 51 opponents to the measure.  The measure needed 60 votes to pass over Republican objections.  The House passed its version 234-191 on March 5.   This is the second time that the  mortgage industry has managed to defeat a measure on adjusting mortgage terms.   JPMorgan Chase & Co., Wells Fargo & Co., Bank of America Corp., the American Bankers Association and Financial Services Roundtable were the main oppenets of the measure.  The three banks have received $95 billion in U.S. tax payers’ money.  The U.S. economy has lost 5.1 million jobs since December 2007, and unemployment has risen to 8.5 percent in March, the highest since 1983.  The U.S. taxpayers remain burdened by debt, as consumer foreclosure filings for March totaled 341,180, a record high, according to RealtyTrac.  In addition consumer bankruptcy filings increased 41% in March 2009 as compared to March 2008.  A total of 121,413 consumer bankruptcy petitions were filed in March 2009.  Most of the information for this article is from the report filed by Margaret Chadbourn in Washington (bloomberg.com).

According to Wall Street Journal and the Treasury Department the largest bank recipients of U.S. government aid are offering less credit to businesses and consumers. In a monthly snapshot of lending by the 21 largest banks receiving Troubled Asset Relief Program (TARP) funds, the Treasury said credit being offered fell 2.2 percent across all commercial-lending and consumer-lending categories in February 2009, compared with January 2009.  Continued deterioration was noted in commercial real estate, general business lending, student loans and auto loans. The lone bright spot remained home loans, with consumers eager to take advantage of record-low interest rates to refinance their mortgages. The Treasury said that 16 of the 18 banks surveyed increased mortgage originations in February 2009, resulting in a 35% increase in mortgage lending from January 2009  levels.  Despite improvement on mortgage originations filing bankruptcy to save homes has not slowed down.

According to Congress Daily after weeks of negotiation, a compromise may have been reached which will give bankruptcy judges greater power to modify the primary mortgages of chapter 13 debtors. The Senate compromise would mandate that if a lender offered a modification through the Obama plan or a program included in last year’s housing bill, called the Hope for Homeowners Act, the homeowner would be ineligible to modify their loan through bankruptcy. At-risk low-income borrowers and those who pay less than 31 percent of their income for mortgage payments would be ineligible for principal reduction, but they could have their rates reduced or their loans amortized over a longer time. If the principal is reduced by a judge, the possible compromise would allow the lender and borrower to evenly split any profit up to the original amount of the loan if it is sold while the homeowner is still in bankruptcy. Only loans that originated before 2009 and amount to less than $729,750 could be modified in bankruptcy. The program would end in 2014.  These restrictions are going to leave a lot of individuals out in the cold.  Also, to save their homes from foreclosure, many individuals will have to file bankruptcy even though they will not be able to utilize the benefits of the legislation when and if it becomes law.

Many older homeowners on low fixed incomes are now facing foreclosure, say legal-aid advocates and AARP attorneys, because they were often fraudulently sold loans they could never afford, the Wall Street Journal reported today. Many of these homeowners had lived for decades in their home and had built up substantial equity, but had low incomes. This made them tempting targets for brokers who persuaded them to refinance their mortgages, telling them they could lower their monthly payments. Instead, many of these loans were loaded with fees and exploding interest rates and quickly became unaffordable. Hundreds of thousands of people in once-hot markets such as California’s Central Valley fall into this category, say housing counselors. Often the only way to keep these people in their homes is if lenders rescind the fraudulent loans or reduce the principal, steps most are unwilling to take.

Bank of America Corp. is raising interest rates on as many as four million U.S. credit card customers who carry a balance, becoming the latest bank to crack down on people who don’t pay off their bill every month, the Wall Street Journal reported today. Starting with June account statements, any credit card customer who carries a balance and has an interest rate below 10 percent will see his or her rate jump into double-digit territory. The company said that the changes would affect less than 10 percent of the bank’s card customers in the United States. The bank has 70 million card customers worldwide, but doesn’t break out the number of customers who are in the United States. The bank’s move follows similar rate increases that other banks, including Citigroup Inc., JPMorgan Chase & Co. and American Express Co., have implemented in recent months. The banks, facing rising delinquencies, blame the current economic turmoil.

The Mortgage Bankers Association (MBA) reported today that the number of homeowners falling behind on their mortgages or already in foreclosure surged during the fourth quarter, according to the Washington Post today. About 7.88 percent of mortgage loans were delinquent during the quarter – a new record, according to MBA – and another 3.3 percent were in the foreclosure process. MBA also said that homeowners are increasingly falling into delinquency because of job and income losses rather than because they obtained a risky loan.

Total bankruptcy filings in the United States increased 31 percent in 2008 over calendar year 2007, according to data released today from the Administrative Office of the U.S. Courts (AOUSC). Bankruptcy filings totaled 1,117,771 for the 12-month period ending Dec. 31, 2008, a significant increase over the previous year’s total of 850,912. Business bankruptcies recorded the sharpest percentage increase as the 43,546 business filings during calendar year 2008 represented a 54 percent increase in filings from the 28,322 filings made during the 12-month period ending Dec. 31, 2007. The 12-month business filing total for 2008 was the highest since the 44,367 filings recorded for the 1998 calendar year. The 1,074,225 consumer filings during the 2008 calendar year represented a 31 percent increase over the 822,590 recorded during the same period in 2007. The 714,389 consumer chapter 7 filings during the 12-month period ending Dec. 31, 2008, comprised 67 percent of the total consumer filings for the 2008 calendar year, up from 61 percent the previous year. The consumer chapter 7 total for 2008 represented a 43 percent increase over the 500,613 consumer chapter 7 filings during 2007.