How Does the "Cramdown" Legislation Impact Loan Modifications?

Last month House Banking Committee Chairman Barney Frank (D-Mass.) said loan-modification programs may be helping more people but they aren't anywhere near the level they should be. These programs are coming in the form of the Obama's Making Home Affordable (MHA) and HAMP, plus many more loan modifications options that are offered by the banks/servicers. In general, homeowners are very much in agreement with Barney Frank's assessment about Loan Medications and Loan Work Out Programs.

Earlier this year, the "cramdown" legislation, passed the Senate but not the House. The "cramdown" permitted bankruptcy judges to modify primary home loans; basically it gave them the authority to force the bank to do a Loan Modification. The reason it didn't pass the House is that mortgage lenders promised they'd take care of the problem and help families avoid foreclosure through Loan Modifications.

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So far, banks/servicers are not taking care of the problem and are far from the Governments expectations of providing Loan Modifications to homeowners. Too many homeowners that should be qualifying for the Loan Modifications are still being denied. Banks such as Wells Fargo and Bank of America are at the top of the list for not meeting Government expectations on loan modifications. Remember, these banks received millions of dollars of Troubled Asset Relief Program (TARP) money or easier to say, tax payers tax money that was implemented during the Bush Administration!

Those in the banking/servicing industry must understand that if there are not a significant number of loan modifications to stop this problem that there is a strong argument to revive the bankruptcy "cramdown" legislation. It seems extremely strong that the way the servicers are handle loan modifications that it is not sufficient enough to handle the current problem. It will surely strengthen the comeback of the "cramdown" legislation and this time it would probably pass.

Last month many cities hits double digit marks for unemployment. This can only follow with more and more homes needing loan modifications to avoid foreclosure as unemployment correlates to the number of foreclosures.

In addition, those close to retirement have found that their retirement is gone, lost by Wall Street. Or they had to borrower from retirement to pay their mortgage because they couldn't get a loan modification. Some have even borrowed money from their credit cards and have racked up a significant amount of debt to just pay their mortgage.

Some homeowners have filed for bankruptcy to relieve themselves of all debt but their home mortgage so that they can qualify for a loan modification.

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