Last April 30, 2009, the US Senate defeated a Bill to spare thousands of homeowners from foreclosure through a bankruptcy filing. The proposed Bill was envisioned to save thousands of homeowners from foreclosure by giving bankruptcy judges the authority to force the modification of monthly mortgage payments by distressed homeowners. However, a dozen Democrats joined Republicans in the 45-51 vote to defeat the measure. California’s Democratic Senators Diane Feinstein and Barbara Boxer were among those voting for the measure.
According to Senate Majority Whip Dick Durbin of Illinois: “The banks that are too big to fail are saying that 8 million Americans facing foreclosure are too little to count in this economy”. However, the Senate Republican Leader Mitch McConnell of Kentucky said that: “The vote today was a bipartisan rejection of an interest-rate hike, which is exactly the wrong solution for jobs, homeowners and the economy”.
This Bill had previously passed the House of Representatives on a 234-191 vote. But it died in the Senate with this 45-51 vote.
The banks and financial institutions lobbied the Senators to oppose the Bill. The financial institutions’ position was that in order for them to cover the losses from these mortgage modifications forced on them by bankruptcy filings, they would have to raise the interest rates for everyone else. Sen. Ben Nelson (D-Neb) who voted against the bill said: “Do I want to have my rate go up so that somebody else might be able to cram down their mortgage payment? “
The failure of this anti-foreclosure bill in the Senate brings an ominous sign on the number of foreclosure that may be coming. There are already signs that the number of foreclosures may soon increase in the next few months. The number of default notices in California and the Bay Area rose to record levels in the first quarter of 2009. These default notices precede actual foreclosures by a few months. This would mean that foreclosed properties owned by banks could further flood the real estate market with bargain-priced properties.
In the first quarter of 2009, there were 135,431 notices of default sent to delinquent borrowers in California. In the Bay Area there were 19,438 default notices sent. Those totals are up by nearly 20 percent compared with the same period last year. Many of these default notices will turn into actual foreclosures in a few months time unless homeowners undertake certain actions to modify or negotiate with their lenders.
Now, more than ever, it is vital for homeowners to be informed of all the government programs that are out there designed to help homeowners. Right now, the US Treasury has a Making Home Affordable Program designed to refinance or to modify mortgage of struggling homeowners. Recently, the US Treasury also announced the Second Lien program designed to help homeowners who have Second mortgages on their homes. Know what these programs are certainly take advantage of these programs if you qualify. It may reduce the monthly mortgage payments of some homeowners while for others it may be the difference between saving a home and foreclosure.
(DISCLAIMER: materials presented above are intended for informational purposes only. It is not intended as professional advice and should not be construed as such. Rey Tancinco is a partner at Tancinco Law Offices, a professional corporation with offices in San Francisco, Vallejo and Manila. The law office website is: tancinco.weareph.com/old. Rey Tancinco can be contacted at (800) 999-9096 or (415) 397-0808 or via email at attyrey@tancinco.com).
