Understanding the New Foreclosure Proposal by President Obama

— a perspective for the Chapter 7 and 13 bankruptcy professional

On February 25, 2010, President Obama proposed a bill that would prohibit foreclosures on home loans unless they have been screened and rejected by the governments Home Affordable Modification Program, also known as HAMP.

At the present time, companies have the ability to proceed with foreclosure actions against homeowners, even though they have registered with HAMP.  However, the proposed changes would prohibit lenders from initiating new foreclosure actions before loan screening by HAMP and would require lenders to halt existing proceedings for borrowers once they are in a trial repayment plan.

DOES THIS INCLUDE ALL HOME LOANS?

No.  Only home loans that are owned by Fannie Mae and Freddie Mac are eligible for this preferential treatment.  However, President Obama has asked the major banks to grant more loans to American citizens since it was all of us who donated the billions of dollars to save the banks less than 2 years ago; but that is a separate story.

HOW DO YOU KNOW IF A HOME LOAN IS OWNED BY FANNIE MAE OR FREDDIE MAC?

At the present time, if a mortgage loan is owned by Fannie Mae or Freddie Mac, the borrower may be eligible for a Home Affordable Refinance to take advantage of lower interest rates.  To find out if a loan is owned by Fannie Mae or Freddie Mac, visit:
http://www.makinghomeaffordable.gov/loan_lookup.html

Additional eligibility requirements are provided at:
http://www.homeloanlearningcenter.com/files/HAMPEligibilityRequirements.pdf

SUGGESTIONS FOR USE OF THIS INFORMATION WHEN PREPARING BANKRUPTCY PETITIONS

Bookmark the http://www.makinghomeaffordable.gov/loan_lookup.html website.  Make sure you add this to the links you use for online searches.  That way, when you start a new petition where the debtors are homeowners, you should automatically run the property address through both Fannie Mae and Freddie Mac to see if the home loan is owned by these two entities.  If so, alert your attorney to this at once by providing him or her with the Eligibility Requirements document referred to above.

The debtor may be eligible for a loan modification which may prove more advantageous than using the cram down or strip down method.  Because every bankruptcy petition is unique and different, you need to have a wide variety of options and resources available to you so that the attorney can utilize the best and appropriate action that is in the best interest of the debtor.

REFERENCE:

Direct link to Bloomberg news article:
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=ahuuwBS8KYq8

Comments are closed.