Personal bankruptcy

Helping Families Save Their Homes in Bankruptcy Amendment of 2009

hmoroz — Fri, 01 May 2009 14:24:08 -0400

Legislation

The middle class

Supports

Video Summary

Injustice Facts

Number of properties on which foreclosure notices were filed in 2008: 2,330,483

Percentage increase in total properties on which foreclosure notices were filed since 2007: 81

Number of foreclosures likely between 2009 and 2012, according to Credit Suisse: 8.1 million

Proportion of all households with a mortgage that will lose their home to foreclosure: 1:6

Number of homes that the Center for Responsible Lending estimates will be saved from foreclosure by the bankruptcy modification provision: 800,000

Average decrease in the property value of each home in the neighborhoods surrounding the foreclosures that are likely to occur in late 2008 and in 2009, in dollars: 8,667

Overview/Summary

Middle Class Position Analysis

Middle-Class Supports. As the economy and the housing and job markets worsen, middle-class households continue to lose equity in their homes and are less able to afford their mortgage payments. The difficulty is compounded for those locked into predatory mortgages with high interest rates. The federal government and the mortgage industry’s continued failure to address the foreclosure crisis adequately could result in as many as 8.1 million foreclosures by 2012. Despite widespread calls for action to confront the crisis, foreclosures increased 81% in 2008. Voluntary mortgage modifications by lenders and banks, encouraged by policymakers in place of comprehensive federal action, have failed to make mortgages more affordable and prevent widespread foreclosures.

Extending the same bankruptcy protections to primary residences that currently apply to luxury yachts and vacation homes is not only fair, but will reduce foreclosures by about 20%, according to Credit Suisse, and benefit about 800,000 households, according to the Center for Responsible Lending. Strengthened bankruptcy protection is also beneficial to middle-class families who are not themselves facing foreclosure: the 2.4 million subprime foreclosures that the Center for Responsible Lending predicts will occur in 2009 will result in a $352 billion decline in property values for homes in neighborhoods surrounding those foreclosures, with an average decrease in property value per home of $8,667. Preventing foreclosures in those neighborhoods will keep property values up, benefiting all homeowners. Indeed, an analysis by the Center for Responsible Lending found that similar legislation would avoid 600,000 foreclosures and thus maintain $72.5 billion in wealth for families not facing foreclosure. Modification of mortgages in bankruptcy will help maintain property values, while keeping middle-class families in their homes, limiting the self-reinforcing spiral of foreclosures and falling home prices.

Additionally, the bankruptcy provision provides a powerful incentive to banks to offer homeowners affordable loan modifications in order to avoid costly bankruptcy proceedings over which they have little control.

Quotes from Experts

Beyond this Bill

Additional Resources

“A Tax-Free Foreclosure Solution: Loan Mods Through the Courts,” from the Center for Responsible Lending

Testimony of Adam J. Levitin, Georgetown Associate Professor of Law, on the Helping Families Save Their Homes in Bankruptcy Act, before the House Judiciary Committee

FinancialStability.gov, the U.S. Treasury’s site with details about the President’s Homeowner Affordability and Stability Plan

Helping Families Save Their Homes Act of 2009

hmoroz — Thu, 05 Mar 2009 15:36:59 -0500

Legislation

The middle class

Supports

Video Summary

Injustice Facts

Number of properties on which foreclosure notices were filed in 2008: 2,330,483

Percentage increase in total properties on which foreclosure notices were filed since 2007: 81

Number of foreclosures likely between 2009 and 2012, according to Credit Suisse: 8.1 million

Proportion of all households with a mortgage that will lose their home to foreclosure: 1:6

Number of homes that the Center for Responsible Lending estimates will be saved from foreclosure by the bankruptcy modification provision: 800,000

Average decrease in the property value of each home in the neighborhoods surrounding the foreclosures that are likely to occur in late 2008 and in 2009, in dollars: 8,667

Overview/Summary

Middle Class Position Analysis

The Middle Class Supports. As the economy and the housing and job markets worsen, middle-class households continue to lose equity in their homes and are less able to afford abusive mortgages with exorbitant interest rates. The federal government and the mortgage industry’s continued failure to address the subprime mortgage and foreclosure crisis adequately could result in as many as 8.1 million foreclosures by 2012. Despite widespread calls for action to confront the crisis, foreclosures increased 81% in 2008. Voluntary mortgage modifications by lenders and banks, encouraged by policymakers in place of comprehensive federal action, have failed to make mortgages more affordable and prevent widespread foreclosures.

Extending the same bankruptcy protections to primary residences that currently apply to luxury yachts and vacation homes is not only fair, but will reduce foreclosures by about 20%, according to Credit Suisse, and benefit about 800,000 households, according to the Center for Responsible Lending. Strengthened bankruptcy protection is also beneficial to middle-class families who are not themselves facing foreclosure: the 2.4 million subprime foreclosures that the Center for Responsible Lending predicts will occur in 2009 will result in a $352 billion decline in property values for homes in neighborhoods surrounding those foreclosures, with an average decrease in property value per home of $8,667. Preventing foreclosures in those neighborhoods will keep property values up, benefiting all households. Indeed, an analysis by the Center for Responsible Lending found that similar legislation would avoid 600,000 foreclosures and thus maintain $72.5 billion in wealth for families not facing foreclosure. Modification of mortgages in bankruptcy will help maintain property values, while keeping middle-class families in their homes, limiting the self-reinforcing spiral of foreclosures and falling home prices.

Quotes from Experts

Beyond this Bill

Additional Resources

“A Tax-Free Foreclosure Solution: Loan Mods Through the Courts,” from the Center for Responsible Lending

Testimony of Adam J. Levitin, Georgetown Associate Professor of Law, on the Helping Families Save Their Homes in Bankruptcy Act, before the House Judiciary Committee

FinancialStability.gov, the U.S. Treasury’s site with details about the President’s Homeowner Affordability and Stability Plan

A Joint Resolution Relating to the Disapproval of Obligations under the Emergency Economic Stabilization Act of 2008

hmoroz — Tue, 20 Jan 2009 18:14:38 -0500

Legislation

The middle class

Supports

Video Summary

Injustice Facts

Amount allocated by the Treasury Department under the initial TARP tranche: $354 billion

Percentage of that original amount allocated for foreclosure mitigation efforts: 0

Number of foreclosures Credit Suisse projected in April of 2008 would occur over the next five years: 6.5 million

Number of foreclosures Credit Suisse projected in December of 2008 would occur over the next five years: 8.1 million

Proportion of homeowners who will lose their homes to foreclosure over the next five years: 1/9

Decrease in the number of loans in loss mitigation in May of 2008 compared to January of 2008: 40,000

Overview/Summary

Middle Class Position Analysis

Middle-Class supports the Joint Resolution of Disapproval and opposes the release of TARP funds without additional conditions. $350 billion have been distributed to the nation’s largest financial institutions so far. Yet, struggling middle-class homeowners have enjoyed no apparent benefit from an expenditure of taxpayer dollars sold to them with a promise to pursue foreclosure mitigation efforts. 1.5 million homes were lost to subprime foreclosures between 2005 and 2007 and another 2 million loans are currently more than 60 days delinquent. In the next five years, 8.1 million homes of all mortgage types will be lost to foreclosure. Worse, there has been little accountability for the spending of the original $350 billion in taxpayer funds.

As the former Treasury Secretary notes in his report to Congress requesting the second $350 billion authorized by the Emergency Economic Stabilization Act, the original Troubled Assets Relief Program created by EESA was designed to stabilize the financial system, increase the availability of mortgage finance and avoid preventable foreclosures, and protect taxpayers. While the Treasury Department argues that the first objective has been achieved, the Congressional Oversight Panel charged with monitoring TARP’s implementation has expressed doubt that financial stability has been accomplished as a result of TARP. Treasury has all but ignored the second and third objectives. In congressional testimony, the head of the Center for Responsible Lending pointed out that foreclosure mitigation efforts have largely failed: seriously delinquent loans are at a record level and the redefault rate on modified loans is high. Nearly eight in ten seriously delinquent homeowners are not on track for any loss mitigation, a figure that has worsened over time. One in five loan modifications made in the past year is currently delinquent. Thus, not only are government efforts to prevent initial foreclosures falling short, but loan modification programs are failing to keep homeowners in their homes in the long term. Congressional oversight of the first $350 billion in TARP funds was meager, primarily because financial institutions refused – with Treasury’s approval – to provide detailed accounts of how the bailout money was used. The Treasury Department has not explained why funds were dispensed in the manner they were, while news reports suggest that few banks have used TARP money to increase lending, choosing instead to shore up their capital positions in case of further economic decline and to plot takeovers of rival institutions.

In short, taxpayers have spent several hundred billion dollars to shoulder the risk of the nation’s largest banks and it is unclear what we have received in return. The Senate Joint Resolution of Disapproval provided an opportunity to delay authorization of the second half of TARP funds until a coherent strategy for distribution and oversight that benefited middle-class Americans could be developed. While assurances from President Obama that he will improve TARP administration are welcome, the force of law is necessary to ensure true accountability.

Quotes from Experts

Beyond this Bill

Additional Resources

TARP Related Documents, from the House Financial Services Committee

Emergency Economic Stabilization Act, from the Department of the Treasury

“Continued Decay and Shaky Repairs: The State of Subprime Loans Today,” from the Center for Responsible Lending

Emergency Economic Stabilization Act of 2008

hmoroz — Fri, 03 Oct 2008 17:44:58 -0400

Legislation

The middle class

Opposes

Video Summary

Injustice Facts

Amount authorized for the Treasury Secretary to use to buy troubled assets: $700 billion

GDP (PPP) of Taiwan in 2007: $695.4 billion

Percentage increase in foreclosure filings from August of 2007 to August of 2008: 27

Likelihood that a U.S. household received a foreclosure filing during August of 2008: 1/416

Number of foreclosures expected to occur in late 2008 and throughout 2009: 2,164,000

Estimated number of foreclosures that the mortgage restructuring provision for primary residences, not included in this legislation, would prevent: 600,000

Decrease in home values caused by nearby subprime foreclosures in late 2008 and throughout 2009: $352 billion

Overview/Summary

Middle Class Position Analysis

Middle Class Opposes. Middle-class Americans, no matter how far removed from Wall Street, will be adversely affected by the crisis in finance and credit that now grips our economy. After a prolonged period of stagnant wages and economic growth that benefited primarily the wealthiest, middle-class Americans rely heavily on credit to purchase everyday necessities, pay medical bills, and fund college educations. Epic stock market declines have eaten away at the retirement savings of senior citizens who have no other source of income. If the government does not act to make more credit available, credit for the loans that finance payrolls and state and local government operations will dry up, increasing unemployment. Government action is absolutely necessary to ensure that middle-class Americans’ standard of living does not suffer gravely from the credit crisis.

Yet, the Emergency Economic Stabilization Act of 2008 is not the action middle-class Americans need. Instead of a top-down bailout, credit markets should be stabilized from the bottom up. To the extent that a direct investment in the financial services industry is made, it should fully complement large-scale mortgage restructuring and foreclosure prevention efforts and the re-regulation of the financial services industry. This would not only benefit struggling homeowners, but is widely understood to be part of an effective strategy to aid financial markets through stabilized payment streams.

The nation’s first priority should be to repair the damage done to the housing market and to the lives of working- and middle-class Americans.

Any proposed remedy for the financial crisis must begin with assistance for struggling homeowners. This should come in the form of a longer-term, government-led commitment to reshape the mortgage landscape of this country. One promising model is the Home Owners’ Loan Corporation (HOLC). Originally established during the New Deal, HOLC made more than 1 million loans to refinance mortgages in distress, which constituted a fifth of all mortgage loans. At present, this would represent about 10 million loans, with the total value of mortgages held by HOLC in 1937 approximately equivalent to the total of all subprime mortgage loans. HOLC helped about 80% of homeowners who refinanced stay in their homes.
Bankruptcy protection for primary residences is critical. This measure would allow bankruptcy judges to rewrite mortgages on first homes (as is now possible for second homes and yachts) on terms struggling homeowners could afford. The change could prevent as many as 600,000 foreclosures.
A moratorium on foreclosures would provide an immediate opportunity for homeowners to work out loan modifications with lenders.

The financial crisis is serious and will affect the lives of middle-class Americans immediately and significantly. At the same time, only financial rescue legislation that includes significant assistance for homeowners can initiate a full, long-term recovery from the current crisis.

Despite the inclusion of several special-interest tax breaks in the Act, the tax changes added to the legislation are generally very important to the middle-class. The energy tax credit expansions and extensions are part of a long-term strategy to alleviate high gas and heating costs, make the country more energy efficient, and ensure that the economy retains jobs in renewable energy and technology. Changes to the child tax credit would make 2.9 million additional children eligible for the benefit and would increase the benefit for 10.1 million more. Temporarily raising the Alternative Minimum Tax exemption ensures that middle-class Americans are not overwhelmed by a tax that they were never intended to pay.

Finally, the mental health and “substance use disorder” parity provisions of the Act not only do much to remedy the discriminatory practices of insurers, but will increase access to mental health care services for middle-class Americans already struggling with high health care costs.

While these last-minute additions to the bailout package are positive for the middle class and should become law, they are not relevant to this bill and should be enacted separately. Ultimately, these provisions do not outweigh the substantial shortcomings of the financial bailout.

Quotes from Experts

Beyond this Bill

Additional Resources

Harvard Law Professor Elizabeth Warren on Bankruptcy Reform and the Housing Crisis

Center for Responsible Lending on Court-Supervised Loan Modifications

A History of the Home Owners’ Loan Corporation from the Center for American Progress

Helping Families Save Their Homes in Bankruptcy Amendment of 2008

hmoroz — Fri, 04 Apr 2008 13:47:08 -0400

Legislation

The middle class

Opposes

Video Summary

Injustice Facts

Percentage of securitized subprime loans from the fourth quarter of 2006 that are projected to end in foreclosure: 50

Percentage increase of foreclosure filings from February 2007 to February 2008: 60

Estimated number of foreclosures that a mortgage restructuring provision for primary residences would prevent: 600,000

Number of homes that will experience devaluation because of subprime foreclosures that take place nearby: 40.6 million

Average decline in property values for homeowners living near foreclosed properties, in dollars: 5,000

Amount of wealth the Center for Responsible Lending estimates would be saved by similar legislation that would otherwise be lost because of foreclosures of neighboring properties, in dollars: 72.5 billion

Overview/Summary

Middle Class Position Analysis

The Middle Class Supports the Durbin Amendment and Opposes this vote to kill the amendment. The federal government and the mortgage industry’s failure to address the subprime mortgage and foreclosure crisis adequately could result in as many as 1.9 million Americans losing their homes in 2008 and 2009. Despite national awareness of the dire situation throughout 2007, foreclosure filings increased 60% from February 2007 to February 2008. Extending the same bankruptcy protections to primary residences that currently apply to luxury yachts and vacation homes is not only fair, but would prevent 600,000 families from losing their homes to foreclosure. Strengthened bankruptcy protection is also beneficial to middle-class families who are not themselves facing foreclosure: protecting these 600,000 families from foreclosure would save neighbors of foreclosed properties $72.5 billion in wealth that would otherwise be lost to reduced property values. Because the Helping Families Save Their Homes in Bankruptcy Amendment restricts eligibility for bankruptcy mortgage restructuring to homeowners who are unable to afford currently existing mortgages, mortgage interest rates should not increase: only homes in danger of foreclosure will qualify and the risk of foreclosure is already calculated into current interest rates. The “homestead floor” of $75,000 for homeowners over the age of 55 who are in bankruptcy allows older middle-class Americans to protect a minimum amount of investments they have made in their homes, while preventing wealthy Americans from using large estates to shelter money from creditors.

Quotes from Experts

Beyond this Bill

Additional Resources

Testimony of Mark Zandi, Chief Economist of Moody’s Economy.com, before the Senate Judiciary Committee

Center for Responsible Lending on Court-Supervised Loan Modifications

Harvard Law Professor Elizabeth Warren on Bankruptcy Reform and the Housing Crisis

Foreclosure Prevention Act of 2008

hmoroz — Thu, 06 Mar 2008 10:53:38 -0500

Legislation

The middle class

Supports

Video Summary

Injustice Facts

Percentage of securitized subprime loans from the fourth quarter of 2006 that are projected to end in foreclosure: 50

Percentage increase of foreclosure filings from January 2007 to January 2008: 57

Estimated number of foreclosures that the mortgage restructuring provision in the Foreclosure Prevention Act would prevent: 600,000

Number of homes that will experience devaluation because of subprime foreclosures that take place nearby: 40.6 million

Average decline in property values for homeowners living near foreclosed properties, in dollars: 5,000

Amount of wealth saved by the Foreclosure Prevention Act that would otherwise be lost because of foreclosures of neighboring properties, in dollars: 72.5 billion

Overview/Summary

Middle Class Position Analysis

The Middle Class Supports. The federal government and the mortgage industry’s failure to address the subprime mortgage and foreclosure crisis adequately could result in as many as 1.9 million Americans losing their homes in 2008 and 2009. Despite national awareness of the dire situation throughout 2007, foreclosure filings increased 57% from January 2007 to January 2008. Extending the same bankruptcy protections to primary residences that currently apply to luxury yachts and vacation homes is not only fair, but would prevent approximately 600,000 families from losing their homes to foreclosure. Strengthened bankruptcy protection is also beneficial to families who are not themselves facing foreclosure: protecting these 600,000 families from foreclosure would save neighbors of foreclosed properties $72.5 billion in wealth that would otherwise be lost to reduced property values. Because the Foreclosure Prevention Act restricts eligibility for bankruptcy mortgage restructuring to homeowners who are unable to afford their current mortgages, mortgage interest rates should not increase: only homes in danger of foreclosure will qualify and the risk of foreclosure is already calculated into current interest rates. Funds for counseling services would further reduce the potential for foreclosure, while resources for redevelopment of abandoned and foreclosed homes would mitigate the decline of property value that weakens the financial stability of homeowners and shrinks the revenues of state and local governments. The Foreclosure Prevention Act is an important next step to assist cash-strapped middle-class Americans after the economic stimulus package signed into law in February of 2008.

Quotes from Experts

Beyond this Bill

Additional Resources

Testimony of Mark Zandi, Chief Economist of Moody’s Economy.com, before the Senate Judiciary Committee

Center for Responsible Lending on the Foreclosure Prevention Act of 2008

Harvard Law Professor Elizabeth Warren on Bankruptcy Reform and the Housing Crisis

Bankruptcy Abuse Prevention And Consumer Protection Act Of 2003

atraub — Tue, 25 Sep 2007 16:03:31 -0400

Legislation

The middle class

Opposes

Video Summary

Injustice Facts

Number of American households deemed “credit worthy” by the leading industry: 8 in 10
Number of middle-class American families that filed for bankruptcy in 2003: 1.3 million
Number of Americans that “always or sometimes worry about money”: 4 in 10
Average amount of debt held by American credit card holders: $2,294

Overview/Summary

Middle Class Position Analysis

The Middle Class Opposes: In 2003, 1.3 million middle-class American families buckled under the crushing weight of increased healthcare, childcare, and other fixed costs, and filed for bankruptcy. Today, bankruptcy filings are more prevalent than filings for divorce, and more numerous than deaths from heart attacks. This bill creates a windfall for unregulated credit counseling agencies, many of which are under civil and criminal investigation. It also empowers the credit card industry to saddle middle-class families with unreasonable interest rates and payment agreements by expanding their ability to re-evaluate and terminate debtor agreements without the consent of a court. And, it would limit Americans’ ability to receive federal bankruptcy protection when they lose their jobs, incur uninsured medical bills or when a wage-earning spouse leaves.

Quotes from Experts

Beyond this Bill

Additional Resources

Bankruptcy Abuse Prevention And Consumer Protection Act Of 2004

atraub — Mon, 24 Sep 2007 16:11:47 -0400

Legislation

The middle class

Opposes

Video Summary

Injustice Facts

Number of middle-class American families that filed for bankruptcy in 2003: 1.3 million
Number of credit card solicitations sent to American families annually: 5 billion
Rank of job loss among the causes of personal bankruptcy: 1
Percentage increase in the rate of medical-related bankruptcies between 1981 and 2001: 2,200
Percentage of Americans with medical debt in a recent study who said they went without food before resorting to bankruptcy: 22
Percent who had a utility shut off: 30

Overview/Summary

Middle Class Position Analysis

The Middle Class Opposes. In 2004, 1.58 million American households, the majority of them middle-class families with children, were overwhelmed by job losses, massive unexpected medical bills or the devastating break-up of their families and were forced to declare personal bankruptcy. The leading cause of bankruptcy was not irresponsible consumer spending, but the loss of a job. Medical crisis was the second leading cause of bankruptcy. This bill is a windfall for the credit card industry, boosting the profits of credit issuers by making it easier for them to collect from the most financially distressed families. It empowers the credit card industry to saddle middle-class families with unreasonable interest rates and payment agreements by expanding their ability to reevaluate and terminate debtor agreements unilaterally. The bill also creates a windfall for unregulated credit counseling agencies, many of which are under civil and criminal investigation. And it would limit Americans' ability to receive legitimate federal bankruptcy protection when they lose their jobs, incur uncovered medical bills or when a wage-earning spouse leaves.

Quotes from Experts

Beyond this Bill

Additional Resources

Bankruptcy Abuse Prevention And Consumer Protection Act Of 2005

atraub — Wed, 19 Sep 2007 14:16:00 -0400

Legislation

The middle class

Opposes

Video Summary

Injustice Facts

Number of middle class American families that filed for bankruptcy in 2003: 1.3 million
Number of credit card solicitations sent to American families annually: 5 billion
Percentage increase in the rate of medical-related bankruptcies between 1981 and 2001: 2,200%
Percentage of Americans with medical debt in a recent study who said they went without food before resorting to bankruptcy: 22
Percent who had a utility shut off: 30

Overview/Summary

Middle Class Position Analysis

The middle class opposes. In 2005, a record 2 million American households were forced to declare personal bankruptcy. Studies suggest that the majority were middle-class families with children, who were pushed to insolvency by job losses, massive unexpected medical bills, or the devastating break-up of their families. In recent years the leading cause of bankruptcy has not been irresponsible consumer spending, but the loss of a job. Medical crisis is the second leading cause of bankruptcy. This bill would limit Americans’ ability to receive federal bankruptcy protection when they lose their jobs, incur uninsured uncovered medical bills or when a wage-earning spouse leaves. The legislation, which has been introduced every session since 1998 but never passed before, enacts the wish list of the credit card industry, boosting the profits of credit issuers by making it easier for them to collect from even the most financially distressed families. It empowers the credit card industry to saddle middle-class families with unreasonable interest rates and payment agreements by expanding their ability to re-evaluate and terminate debtor agreements without the consent of a court. The bill also creates a windfall for unregulated credit counseling agencies, many of which are under civil and criminal investigation.

Amendments that would have allowed the elderly to hold onto their homes and would have shielded veterans and active duty military from the most punitive parts of the bill did not pass the Senate. An amendment that would have protected employees’ earnings and retirement savings when their employer files for bankruptcy was also rejected.

Personal bankruptcy

Helping Families Save Their Homes in Bankruptcy Amendment of 2009

Legislation

The middle class

Video Summary

Injustice Facts

Overview/Summary

Middle Class Position Analysis

Related Blog: Header

Quotes from Experts

Related Blog: Text

Beyond this Bill

Related Blog: Link

Additional Resources

Helping Families Save Their Homes Act of 2009

Legislation

The middle class

Video Summary

Injustice Facts

Overview/Summary

Middle Class Position Analysis

Related Blog: Header

Quotes from Experts

Related Blog: Text

Beyond this Bill

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Additional Resources

A Joint Resolution Relating to the Disapproval of Obligations under the Emergency Economic Stabilization Act of 2008

Legislation

The middle class

Video Summary

Injustice Facts

Overview/Summary

Middle Class Position Analysis

Related Blog: Header

Quotes from Experts

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Beyond this Bill

Related Blog: Link

Additional Resources

Emergency Economic Stabilization Act of 2008

Legislation

The middle class

Video Summary

Injustice Facts

Overview/Summary

Middle Class Position Analysis

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Quotes from Experts

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Beyond this Bill

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Helping Families Save Their Homes in Bankruptcy Amendment of 2008

Legislation

The middle class

Video Summary

Injustice Facts

Overview/Summary

Middle Class Position Analysis

Related Blog: Header

Quotes from Experts

Related Blog: Text

Beyond this Bill

Related Blog: Link

Additional Resources

Foreclosure Prevention Act of 2008

Legislation

The middle class

Video Summary

Injustice Facts

Overview/Summary

Middle Class Position Analysis

Related Blog: Header

Quotes from Experts

Related Blog: Text

Beyond this Bill

Related Blog: Link

Additional Resources

Bankruptcy Abuse Prevention And Consumer Protection Act Of 2003