Senator Dick Durbin introduced new legislation (S.61) titled the Helping Families Save Their Homes In Bankruptcy Act of 2009 .  Also, the exact same legislation was introduced in the House of Representatives by Representative John Conyers.

This legislation, if passed, will allow Bankruptcy Judges to modify the mortgages on residential real estate, a practice which the current Bankruptcy Code prohibits.  In the past, similar legislation failed to get the necessary support to move through Congress, and the President vowed to veto any bills containing the mortgage modification language.

However, the recession has changed some minds in Congress.  This legislation seems to be on the fast track to be included in the new stimulus legislation that is also moving through Congress.

It appears that the Democrats in Congress were serious about making changes to help ease the country out of recession.  Allowing Bankruptcy Judges to modify mortgages in Bankruptcy Court is not a new topic.  Bankruptcy Judges deal with valuation of assets on a daily basis in Bankruptcy Courts across the nation.

This legislation is being supported by twenty three (23) State Attorney Generals.  Likewise, AARP has made this one of their top priorities for 2009.

The reality is simple. The banks have received or will receive more than they should under the Bailout.  We the taxpayers are bailing out everyone on a daily basis, and in the future, I'm sure the hand outs will continue.  Why are we so afraid to help the working guy or gal?  Hasn't corporate America taken advantage of the working class long enough?  How much money from the bailout has actually made it to Main Street?

Allowing people the opportunity to save their homes, modify the mortgages, and deal with all of their financial issues in one place will result in more people saving their homes and communities, and hopefully, provide families with more disposable income.

Bankruptcy is a process of bringing debtors and creditors together in a forum to deal with their financial issues.  Adding one step in the process may seem like it will be harmful, but in reality, it will result in more people saving their homes and dealing with all of their financial issues.

Hope For Homeowner's Law

Although it didn't receive nearly as much press, the $300 billion "Housing and Economic Recovery Act of 2008" may provide more immediate relief for struggling homeowners than the signed $700 billion economic bailout, Emergency Economic Stabilization Act of 2008.

Signed into law in July, the recovery act created the "Hope For Homeowners" or H4H (Division A, Title IV, Section 1402 and Section 1403) program.

•  Section 1402, effective Oct. 1, 2008, allows troubled mortgage holders to avoid foreclosure by refinancing into smaller, more affordable, Federal Housing Administration (FHA)-backed mortgages, provided they give Uncle Sam a piece of the equity-growth action and provided the lender voluntarily agrees to the deal by writing down loan balances.
• Section 1403, effective when the law was signed, mandates that mortgage servicers modify loans for certain homeowners to help them avoid foreclosure.

Recovery provisions more immediate

Under Section 1403 of the H4H deal, mortgage servicers must modify loans for homeowners and help them avoid foreclosure as long as three requirements are met:

1. A default on the mortgage either has already happened or is "reasonably foreseeable."

2. The homeowner is living in the property as his or her primary residence.

3. The lender is likely to recover more through the loan modification or workout than by forcing the homeowner into foreclosure.

However, it's up to the homeowner to prove, in writing, his or her case to the lender and that could take some negotiating, even legal wrangling.

•  It may be advisable to consult with an attorney -- especially if you qualify for a loan modification under the law and your lender still refuses to work with you.
• The key is to demonstrate how the lender is likely to recover less money through foreclosure than they would by working with you in your proposed loan modification plan.

More immediate H4H help

Also under H4H's Section 1402, troubled mortgage holders can avoid foreclosure by refinancing into smaller, more affordable, FHA-backed mortgages, provided they give Uncle Sam a piece of the equity-growth action and provided the lender voluntarily agrees to the deal.

U.S. Department of Housing and Urban Affairs' "Hope For Homeowners"fact sheets spell out the details.-

- The refinanced, 30-year, fixed rated FHA mortgages in the H4H program are for homeowner-occupants (with no additional ownership interest in another home, say, a second home) having difficulty making their payments.

- Banks are not mandated to write the loans, but can volunteer to write down an existing mortgage to 90 percent of the new appraised value of the home. Any holders of existing mortgage liens must waive all prepayment penalties and late payment fees and release the liens. The existing first mortgage holder has to accept the Hope for Homeowners loan as full settlement of all outstanding indebtedness.

-The existing mortgage must have been originated on or before January 1, 2008, and the owner must have made at least six payments.

- As of March 2008, the homeowner's total monthly mortgage payments due must be more than 31 percent of the household's gross monthly income.

- The loan amount on the new H4H mortgage cannot exceed $550,440. The amount can include a financed 3 percent "Upfront Mortgage Insurance Premium" and other loan costs. The homeowner must also pay a 1.5 percent annual mortgage insurance premium.

- The homeowner cannot take out a second mortgage for the first five years of the new loan, except under certain emergency conditions.

- The borrower must agree to share with the FHA, both the equity created at the beginning of the new mortgage and any future appreciation in the value of the home. If the home is sold or refinanced, the homeowner will share the equity with FHA on a sliding scale ranging from a 100 percent FHA share after the first year to a minimum of 50 percent after five years. The FHA will share a portion of equity earnings, when available, with past lien holders until any available appreciation is exhausted. Any left over appreciation goes to the FHA.

Some experts say the FHA equity sharing deal is one of the best mortgage ideas to come out of Washington, D.C. since the Great Depression because it could generate mortgage market interest in equity-sharing, a long maligned and often misunderstood, but potentially useful, creative financing technique.

Read more: http://www.consumeraffairs.com/news04/2008/10/bailout12.html#ixzz0WqoQHHOJ