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H.R. 3609, The Emergency Home Ownership and Mortgage Equity Protection Act of 2007
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Visitor Comments
Jim
Correcting this limitation that bars the courts from modifying mortgages on primary residences needs addressed. I wrote my representative to express my reasons for the need for the bill to become law.
Jim
Pat Tiberi, my representative is so far unresponsive regarding support for HR 3609.
The last letter I wrote to my representative remains unanswered.
--- Hopefully the legislation passes with other representatives, the senate and the administration of the USA.
J. Liudahl
Has anyone considered the impact this bill will have if it authorizes judges to unilaterally reduce the loan amount of any mortgage and convert them to unsecured status? We are talking all mortgages here, including prime. Don't you think the lender reaction will be to charge much higher mortgage loan rates. How will that help Americans buy homes?
Jim
It will allow all loans to be adjusted as is possible with rental properties, vacation homes
Removing the exception will only help keep people who meet hard times with a court that has the power to set the loan to the value of the property, set the rate to fixed rate where one can complete a successful chapter 13 plan.
Jim
contd - In my situation, I had to file bankruptcy because of my wife meeting with a long period of not being able to find consistent employment. My house was still set in the "teaser rate" period which still allowed a workable, though fragile plan to be attempted.
Now with the fact that there is not a lot of announcement by the bankruptcy lawyers that your mortgage rate is not frozen at the current rate or even changed at all. The courts cannot modify the loan.
Now I know the loan will adjust upward 3% which translates to actually a 44% increase in the mortgage payments. Since I am insolvent and have to contribute all but a very low amount of allowed expenses. Do I ask my employer for a 44% raise?
Bruce
This bill is not well thought out.
What is forgotten, is where that mortgage funding originally came from. Try things like your, my, everyones pension funds and insurance companies. They take money over time and invest it in things that are supposed to be safe.. like mortgages for homeowners. Drop the rate of return that the banks get on mortgages, and the value of the mortgage securities drop drastically.. meaning that the pension money will not be there when you, i or anyone else retires. Your monthly insurance costs will go up. Insurance companies also invest in mortgages, so that the funds would be there when they have to pay out.
Forcing the renegotiation on rates will also risk putting several banks into bankruptcy. Think of where they get the money from. They have to borrow the money from somewhere to loan it out in the first place.
Bruce
As for teaser rates, never buy based upon whether you can afford the teaser rate. Always look at the fully indexed rate. Sounds more like someone was speculating and was going to sell before it indexed up, only to find that the selling price would be less than the outstanding balance on the mortgage..
Besides.. what does allowing those irresponsible to be able to index below those who acted responsibility..
Bruce
Besides.. what type of message does this bill send? Act irresponsibly and well bail you out, act responsibly and we'll screw you? Is this the type of message we should be sending? Is this the type of message our children should be taking from our behavior? Some message!! Why should they be expected to act responsibly if we don't?
Jim
Look on the actual results of applying an exception to a first mortgage and no exception on any other person who takes out a loan and becomes insolvent for any reason. A vacation home, investment property can be renegotiated by the bankruptcy courts. Someone actually using a property for shelter is not protected. I don't recommend increasing the exclusion clause against investors or those fortunate to have a vacation home. If they lose their primary residence, they have another place to go.
Jim
What is the case, we give those that lend money for primary residence a shelter while the one needing shelter is left without a shelter.
What will happen since the loans are not negotiable and are unmaintainable for those in insolvent conditions is the primary residential property will be foreclosed on. The mortgage company will take the hit for the loan being defaulted. The person who could have paid back the loan on better conditions would need to go liquidation vs. wage earner.
Jim
Regarding the teaser rate and the eventual extreme increase in interest rates after the two year teaser period, if I was solvent I would still be just entering the bankruptcy courts because of the collapse the mortgage industry will be in once it forces most into liquidation because of their bad loan practices. They should never offer something that is not maintainable to those the money was loaned to. Those who took out such loans are victims. They see the nice house and at the time affordable payments. The loan companies know not many get 44% pay increases in a two year period. Why make suicide loans?
HR 3609 will restore fairness to both lender and debtor. It will make our courts able to treat all loans with equal weight. Those with good loan terms will still be upheld since the current conventional rate will have an additional percentage portion for risk premium.
Less homeless and stabilizing the financial market will result by striking 1322(b)(2).
Bruce
Ok.. here is a clearer example since the point is missed.
Hey bank, I know I only make the salary of a Walmart Greeter, but you really must/have to negotiate the rate back to the initial 0% rate for that Mercedes I bought. I would not be able to afford the payments otherwise and might have to buy something more pedestrian.
They should never offer something that is not maintainable to those the money was loaned to.
Sounds like you are blaming the bank for a bad decision on your part. You should be the best judge of what you can afford. Otherwise you are asking for an extreme form of big-brother making all the decisions for you that it feels you should make.
Bruce
As for the low teaser rates.. it is simple. If I make enough money to cover the fully indexed rate, I save the difference between the two and invest it. The low teaser rate gives me the ability to pay down a chunk of it. Or lets say I am in a high paying job having to relocate, and the new job will not cover all of the relocation expenses. These are the uses of the teaser rates.
You have a car that will exceed the 65 mph speed limit. So by your logic, any car can not be manufactured that can exceed the speed limit (even if it is an emergency).
Bruce
A hint on risk premium.
With a FICO of 750+, current risk premium puts the rate at LIBOR+1. That is 5.9%. Any lower credit rating or risk on LTV(loan to value) puts the rate higher.
Give me a break on the "less homeless" crap. Try renting.. I'm renting.. and I can afford a house because my income is 6 digit. I am renting because the price of houses as a factor of income is way out of whack. (median price house is greater than 10x median income, number should be 5 or lower).
Bruce
As for the stabilizing effect of striking 1322(b)(2).. that is crap. That will cause the risk premium spread to increase because banks have to factor in being force into a negative return when someones rate gets pushed down by the court. Therefore instead of lending at LIBOR+1 for FICO 750+, they will lend at LIBOR+2 or LIBOR+3. Remember: Banks are borrowing the money from someone else. If they get it at LIBOR, they can't loan it out any lower than that on a zero risk proposition.
LIBOR = London Inter-Bank Offer Rate.. the rate that banks borrow and lend money from each other.
Jim
The example above is not realistic. The interest rate negotiable down for car loans is a bit over 8%. Car loans are negotiable.
HR 3609 addresses an exception for home mortgages for primary residence. There is a senate bill also submitted that is similar to HR 3609. In the Senate bill homes are to be set at conventional rate with a risk premium. This is a lot better than a floating rate that goes up 44% in payments(3% supposedly in mortgage interest rates). Then every 6 months it is based on LIBOR 6-month plus 5%.
Jim
I can see a benefit for the investor regarding the teaser rate. The investor is still not limited if it is not his primary residence. In my situation the teaser rate was all that was possible to pay even before my wife and her unfortunate hit and miss employment which directed us into a wage earner plan. Now it looks like liquidation and jettisoning the home is all that is rational.
Jim
I rented before and this is the first home that I ever financed. Your reference to LIBOR+1 sure beats LIBOR+5 (6 months)
Previously I rented for the previous 25 plus years and never owned real property. The continuous increase in rent from year to year was one factor which encouraged me to look for home purchase.
Jim
The stabilizing by striking 1322(b)(2) is not crap. It is to say to investors that the US does not regard the investor above the originator of the funds through favored treatment on securities.
If the loan industry is forced to increase rates across the board because of their loss of parasitic power, so be it. I will probably be in the rental market shortly and could care less if rich are not as rich as they want to be and can borrow at a very low interest rate.
Bruce
>The example above is not realistic.
The example is realistic.. it is pointing to intent and mindset.
> I can see a benefit for the investor regarding the teaser rate.
I was addressing non-investors here. There is no real advantage for an investor because they will hold for long term appreciation. They will want to lock the spread between rents and mortgage rates in. There is a benefit for flippers because they are short term and will be out before the rate resets.
>Your reference to LIBOR+1 sure beats LIBOR+5 (6 months)
Yep.. but you missed the message! If a person will no longer get LIBOR+1 because mortgage companies make a risk adjustment for 750 FICOs, then people with your financial situations will NOT get LIBOR+5. They will be charged LIBOR+8. All rates get adjusted by risk. 1322(b)(2) will increase the risk on all mortgages in the eyes of lenders.
> The continuous increase in rent from year to year was one factor which encouraged me to look for home purchase.
Bruce
> The continuous increase in rent from year to year was one factor which encouraged me to look for home purchase.
Piece of advice here.. best time to buy is not when the interest rates are low. It is when they are high. Use the time to save up the down. House prices and interest rates are inversely correlated. Use the interest rate drops to refi to a lower fixed. Don't equity out because that will bump up the rate you get charged.
Bruce
>If the loan industry is forced to increase rates across the board
>because of their loss of parasitic power, so be it. I will probably
>be in the rental market shortly and could care less if rich are not
>as rich as they want to be and can borrow at a very low interest rate.
This tells me you really don't get it. Here's a clue. The rich don't need mortgages!! They buy with more than 20% down.. sometimes entirely with cash! Higher rates will price the lower end completely out of the market, and permanently. It will also force house prices down making it easier for the rich to buy with cash.
Jim
I'll skip the example. I know that the courts find mid ground that benefits the person with the car and the loaner of money for the car. The reduction in the interest rate for the car was of some benefit compared to filing liquidation. The interest rate reduction did save $115 a month compared to pre-bankruptcy.
I guess flippers is more realistic than use as investment property.
I cannot see why the LIBOR is used for loans originated in the US. I do not see rates going to plus 8 just because one can possibly save their homes with negotiated rates. The only loser I see here are the parasites who buy foreclosed properties at very low dollars. They will have less to steal. I do see gains on the lender side and on the homeowner remaining a homeowner.
Jim
I do agree that property values and interest rates seem to complement each other. The consumer gets taken for their income in either interest or inflated prices. Before I bought a house, I saw the situation that we are now in with escalating housing prices. It was destined to get to the point where borrowers would not have the earning power to afford to buy. I believe the ARMs with affordable starting rates to qualify borrowers who could not afford the lending industries ideal of an acceptable return neglected to foresee that once the terms change to where the borrower could not afford the property that the oversight regarding the 1322(b)(2) clause would need to be stricken, otherwise the only winners will be buyers of foreclosed properties.
Jim
I may not understand if a very rich person would finance property for the tax write-off or would buy outright. Buying outright makes more sense to me if I had the funds.
I do not see the benefit to the lender or to the one made homeless because of the exclusion from negotiation presently in the chapter 13 code. When 1322(b)(2) finally gets stricken from the code, we will see that interest rates and bank failures will not increase. We will see the prevention of a total collapse which this exclusion pretty much guarantees. Banks are hesitant to negotiate with no escape through bankruptcy, regardless of their financial loss. Forcing people into chapter 7 vs chapter 13 is what 1322(b)(2) causes. The bank gets the full loss, I have nothing to pay back. I would feel better with keeping the house and negotiating a possible payback plan. Hopefully 1322(b)(2) is stricken very soon.
Jim
After tracking testimonies from banks, the mortgage industry and now seeing some campaign to make it seem that the bill produces a 2% "hidden tax" to consumers across the board, I am more convinced that we need this legislation to pass to save homeowners. When the opposition starts campaigns of fear, we should realize that the opposition has nothing to present in argument.
Jim
I am still following this legislation and am glad to see that there is finally a politician from my state, but not my district who is sponsoring this legislation. My representative, Pat Tiberi just stated fiscal responsibility. It is good to see that both parties are becoming concerned with this legislation and my first view of this being only supported by the Democratic party is no longer a reality. I just received a notice from the courts where my payments go up $500, around $350 is for the loan, the rest is for property taxes. It is highly likely that I'll face a surrender of the property and my chapter 13 plan will fail without allowing bk judges the power to negotiate these loans. All it takes is good legislation that strikes out unfair provisions, Thanks goes to the Ohio Representative that supports this legislation.
John Worley
Of all of the stupid pieces of legistration that I've seen over of the years, this one takes the cake. You complain about high interest rates from these ARMs now..then pass this bill and watch them skyrocket.
Jim
This legislation is good legislation. It stops the treatment of a loan for a primary residence from trapping a borrower into a situation where the loan was given with terms that should not ever have been dealt out to any borrower.
This legislation will allow all secured creditors to be treated equally.
Interest rates for the market will not be effected. Bad loans dealt out to borrowers will be detoured.
Tony
Look...the average american should be afforded a chance to own a primary residence. All the other speculative, flipping, etc. crap...should be subject to different rules / rates. A primary residence loan rate should not be higher than 6%...period. It should be electable for 10, 15, 30 years and would be a very stable instrument (much like a Mutual Fund). You want to gamble and invest in the 5/1 ARMS that adjust to 11% and then see the mortgage default...fine...but don't put that monkey on the back of a primary residence owner / purchaser. Pass the reform, allow the BK judges to deal with the predators, and f*** them for going there in the first place.
Jim
I have contacted both Senators from my state and my representative. The Democratic Senator is co-sponsoring the Senate bill S 2136. The Republican Senator is changing his email policy to not receive certain action committee mail.
I submitted a mail to his contact interface and am waiting for another response.
There is one representative from the Republican party who is co-sponsoring the bill but is there to add limitations to the bill which require being in foreclosure (I was), having an adjustable ARM (it is), an Interest only mortgage (it is). For the Presidential candidates, Obama is a co-sponsor for the Senate bill. Clinton or the others are not. Dodd rescinded in Iowa but is a co-sponsor for the Senate version Durbin Originated.
We need help now. The legislation is stalled too long. Either the house bill or Senate bill needs passed. Sitting on these legislative reforms does noone much good.
Jim
It is great to know the amount of representatives co-sponsoring this legislation has increased, many since 1/15 and a lot from 2/7/2007.
Our representative is still not on this bill. I expected not to see his support but still would like Pa Tiberi to get off the Greed treadmill and help out the constituents for this district.
Smurf
I am a victim and I am for the bill HR 3609
Jim
Good luck to you. I know how practical this provision is to help those save their home from bad deals the industry stuck a lot of families with. I look at a home as a place to live. It is a shame that there are many in congress which do not relate to this matter and expedite this legislation instead of allowing it to set dormant for so long. We need this legislation now! not after everyone loses their primary residence. The last deal the lenders made is absolutely worthless since I a excluded from help in that situation. I passed the foreclosure disaster but am still burdened with a non-negotiable exploding arm.
Jim
Well, I was informed that Speaker Nancy Pelosi has the ability to put this legislation forward for the full house to be able to vote.
The issue should be brought forward soon.
My congressman Pat Tiberi was positive in response to the issue. How he will vote is up to his determination on the issue. As a Realtor previously his insight into home ownership should be positive.
Write to the Speaker at AmericanVoices@mail.house.gov in order to get this legislation moving again.
jman
This will only encourage a huge amount of Bankruptcies. ANd how can property value be determined if it is all Manipulated. Won't the prices still keep going down if judges force them down?
Also, investors will now want higher interest rates to cover all the new risk they will have. And you can kiss subrime loans goodbye forever. that is, until all the "al sharptons" come out and say they are now disrciminated against. Be carefull what you wish for, help a few people, but ruin it for the majority.
JMAN
Hey Jim, quick acting like the indusry just all of a sudden came along and stuck people with these loans. I was looking for a home, yet I was able to NOT sign one of these contracts. Either i'm superman, with superpowers that allow me to read contracts, or maybe the buyers LET THEMSELVES be stuck with these loans. Quit the "culture of victimization" crap!
Jim
This will only apply to families who are in foreclosure, are below median income and are saddled into interest only/exploding arm loans. It will not encourage any more to file bankruptcy. It will give people that were trying to make it and were doing fine until the reset set off a conditon where they are no longer solvent. Currently they cannot save their homes from foreclosure in bankruptcy since they are not negotiable.
Jim
continued:
Regarding your ability to bypass a loan with these provisions, more power to you. This is not however an uncommon predicament with homeowners. also inhterest rates will not go up or down whether the exclusion lenders for primary residences are protected against.
Thanks for the response. I like to know how non-victims justify circumstances which they are not faced with.
Jim
Now there are 66 co-sponsors and two that are Republican. At least there are more signing onto this legislation before there is an ever increasing number of families who will lose their homes.
Jim
s.2136 is the Senate version. We have Dodd, Obama, Clinton and Kerry supporting this bill in the Senate. Three were running, my favored dropped out in Iowa but is still doing good in the Senate on Family protection issues. If Obama or Clinton get elected we should not fear a veto. We would need another Senator though that supports this legislation.
Jim
We know the legislation is equitable and sound without the amendments. It is also obvious that this legislation needs advanced and placed into law, reducing the inequity caused by the exclusion from 1978.
Jim
Update, now there are 82 cosponsors for this legislation.
Some topix posters think 17 cents is above their means but 44% increase in monthly payments is OK!
WE probably should be fair and raise taxes on individuals above 200K a year by 44% and gauge their increases on the 6 month LIBOR plus their current rate now as the teaser rate.
Jim
Two more Ohio Representatives, a Connecticut Representative and a New York Representative have joined to co-sponsor this needed legislation. Thanks to those as well as those that co-sponsored this legislation before.
Jim
It appears the check cleared from the pacts opposing this needed reform for two Representatives, on NY and one Ohio representative. I hope this election the toggling and lack of support lands them a new job outside representing our nation.
Jim
If gas prices rose as slow as Congress advances legislation, we would still be paying 50 cents a gallon.
Except this legislation stalling only increases home loss and gives Mortgages on primary residences unfair advantages over other creditors and debtors.
110th failed
The 110th Congress failed in getting a lot of legislation which would be helpful passed. The push-me-pull-me makeup of the Congress was and is a catastrophe.
If I understand how Congress works, this and all pending legislation will be tabled and a new introduction of this legislation developed when the 111th Congress goes in session. Shameful that the 110th was a no-go all-blow
Congress.