Posted on 03/08/2009 5:54:14 PM PDT by Born Conservative
A proposal that would allow mortgage servicers to modify loans without fear of lawsuits from disgruntled investors has been approved by the U.S. House.
The provision, originally introduced by Rep. Paul Kanjorski, D-11, as a separate bill, was approved this week, 234-191, as part of a broader bill to help financially strapped home buyers hold onto their homes.
Millions of mortgages were bundled together and sold to investors as securities. Some lenders are reluctant to reduce the principal or interest rate on troubled loans — even if those loans are in danger of foreclosure — because they fear legal action by investors whose debt instruments will be worth less if the loan terms are reduced.
"Without a cost to taxpayers, my provision in this bill will prevent more Americans from losing their homes," Kanjorski said in a statement. "By making it easier for lenders to take losses earlier in the process, we can help to stabilize home prices, preserve our neighborhoods, limit investor losses, and prevent more widespread suffering."
Kanjorski, who chairs the House Financial Services Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises, says investors will actually lose more money if the loans aren't modified and go into foreclosure.
But Republican leaders say the overall bill rewards irresponsible lenders and borrowers. They say Kanjorski voted against provisions that would have prevented taxpayer money from being used to help buyers who lied about their incomes on loan applications or lenders who didn't follow proper underwriting standards.
"While homeowners are struggling to pay for their mortgages, Kanjorski refused to stand up to the irresponsible speculators and lenders that contributed to our current housing crisis," said National Republican Congressional Committee Communications Director Ken Spain. "If Paul Kanjorski is fighting for the dishonest characters that got us in this mess, who is fighting for his constituents who played by the rules?"
Kanjorski said the bill provision he supports — allowing lenders to modify loan terms without fear of investor lawsuits — won't cost taxpayers anything. He points to support for it among Republicans, such as Rep. Spencer Bachus of Louisiana.
"The ... language providing a safe harbor for mortgage servicers is a timely and targeted solution that encourages loan modifications that benefit both homeowners and investors," Bachus said during floor debate. "It is a common-sense approach to help keep American families in their homes."
Michael J. Hanley of United Neighborhood Centers, a Scranton-based consumer counseling agency that works in Monroe County, called the bill "a balanced piece of legislation" that will save "countless homes" from foreclosure.
There were a record 1,500 home foreclosure filings in Monroe County last year, according to the county Prothonotary's Office. RealtyTrac reports 102 county filings during January.
Kanjorski said the bill also includes an amendment he authored that gives credit unions a five-year window to rebuild deposit insurance reserves. Credit unions need that time to recover from the impact of the recession, he added.
The measure moves to the Senate for consideration there.
He's probably doing this to a) get more votes and b) suck up to Queen Pelosi, since he's #3 on her Feces List
Ping
Who gets to keep the profits on any such properties once sold?
35 counties.
THIRTY-FIVE COUNTIES.
All in blue states.
That’s where these foreclosures are concentrated.
That’s what the marxist/communist democrat party are going to renegotiate on our dime.
I come to you, an investor, and ask for a loan of $200,000 to buy a home. You know that a year from now I can file bankruptcy and only owe you $150,000. Would you loan me the money?
This is going to cause rates and fees to go through the roof. It’s only a matter of time before 20% is once again required to buy a home. There will be no more mortgage insurance.
Proof positive that I’m just a putz for paying my farm mortgage each month for the past 15 years; good times and bad. :(
Lawyers are makin a mint off this.
How is this not a “Taking”. Taking the money of the lender without compensation is unconstitutional.
“I come to you, an investor, and ask for a loan of $200,000 to buy a home. You know that a year from now I can file bankruptcy and only owe you $150,000.”
Uhh thats the way its always been. Bankruptcy is bankruptcy. Until of course a couple years ago when the unsecured loans became harder to discharge.
“How is this not a “Taking”. Taking the money of the lender without compensation is unconstitutional.”
Unconstitutional? Theft is theft.
However I have no concern for the banks or investors. They knew what they were doing and decided greed was a positive attribute.
It may be just an 'insurance policy' for mortgage servicers who were never going to be sued anyway, and the whole thing may just be another liberal 'feel-good' law!
So it's OK to steal from people you don't like?
Kanjorski is such a crook that you know he or his family is getting something out of this.
RUSH: Barney Frank invoked my name on the floor of the House. It was last night on the House floor, and Barney Frank talking about foreclosures and me.
FRANK: There is, for instance, a noted commentator on public affairs, Mr. Limbaugh, who has a certain number of fans on that side, and if they aren't fans, they're afraid to say so. He has asked that the president fail. Well, the effect of this amendment would give Mr. Limbaugh his wish, because if you cripple the effort to reduce mortgage foreclosure, you cripple the effort to get out of the economic slump we are in. So I understand what some people would like to see happen, they do not want President Obama and a Democratic Congress to get any credit for helping to reduce our economic situation. They're taking a lot of innocent people hostage.
RUSH: Well, that's the most convoluted way of looking at this that I can imagine. Now, he's talking about the amendment that would allow people who cheated on their initial documents to still be able to get a crammed down reduction on their interest rate. So this amendment will allow people who cheated and who lied on their loan application to still get a cramdown, meaning a judge could reduce the cost of their mortgage payment. This is what Barney was going for and of course he brings me up as the enemy of all this. There's a great post here by a Yale economic professor about all of this. It was tough sledding for me, the way this is written, to understand it. It involves the concept that they're really not helping anybody by reducing their interest payments, that the only way to really help people here that are underwater is to reduce the principal, but the principal is not being touched, which means that at some point responsible people are going to default anyway because all they're doing is renting. They're going to have no equity even if their payment lowers. I'll get to that in just a moment. Here again, Barney Frank advocating an amendment to allow people who cheated on their initial application for a mortgage to still get a cramdown.
Just as they always have: http://nokanjo.blogspot.com/2008/05/family-affair-aka-nepotism-at-its.html
“So it’s OK to steal from people you don’t like?”
Are you talking what bankers have done to their customers or what their customers are now doing to the banks?
“I’m talking about condoning theft from ANYONE just because you don’t like them.”
Bankruptcy is not theft.
If the bank modifies the loan the borrower is not stealing. The borrower’s commitment is to the bank. The bank is voluntarily changing the contract in order to minimize their loss.
The only possible theft is what the bank is doing to the investors. Sad to say this is probably in the investors best interest as well. Most homes in foreclosure will sell for significantly less than the money owed.
I wonder if a class action suit is possible if someone (like me) was charged a fee (I payed a point) to lock in a lower fixed mortgage rate (5%) and now others are going to get theirs reduced as low as 2% for free (in fact, my tax dollars will be used to pay for it)...
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