Please note that this writer is not licensed to practice law in Oregon. This means that he is not legally permitted to give any legal advice or perform any legal services. This Bulletin and the entire contents of this website is written only for attorneys. and is not intended for the public. If any non-attorney is reading this, you must consult an attorney about ANYTHING you read here. Nothing in this website is intended to be nor should be read as being legal advice to anyone.
By Andrew Toth-Fejel, Bankruptcy Litigation Support for Attorneys, Andy@BLSforAttorneys.com[LATE-BREAKING NEWS: AS OF EARLY THIS AFTERNOON, 9/29/08, THE HOUSE OF REPRESENTATIVES VOTED DOWN THE EMERGENCY ECONOMIC STABILIZATION ACT OF 2008, CONTRARY TO EXPECTATIONS.]
As of Friday the mortgage modification amendment to the Bankruptcy Code was taken off the table by Democrats during the intense negotiations In the Capitol over the bailout bill, as announced in a closed-door meeting to Democrat legislators by Barney Frank, Chairman of the House Financial Services Committee. Despite this bankruptcy provision being one of the main provisions of Barney Frank's and Senate Banking Committee Chairman Christopher Dodd's responses to Treasury Secretary Henry Paulson's original proposal, it apparently became a "poison pill" sacrificed in order to reach compromise during the weekend. As stated by Rep. Joseph Crowley, a New York Democrat and member of the House Democratic leadership, "There is the belief we would not be able to pass a bill with the provision," There was enormous pressure to announce a final compromise among congressional and Treasury negotiators by the time the Asian stock markets began business Monday morning.
So without the mortgage modification amendment, what does the Emergency Economic Stabilization Act of 2008 (as of its form available Sunday evening, Sept. 28) contain of help to struggling homeowners? Putting aside the general benefits of avoiding the total seizing up of the credit markets, there is little if any tangible help for homeowners.
The Emergency Act establishes the Troubled Assets Relief Program (TARP) authorizing the Secretary of the Treasury "to purchase . . . troubled assets from any financial institution" through a new Office of Financial Stability, overseen by a Financial Stability Oversight Board.
Section 109 of the Act, entitled "Foreclosure Mitigation Efforts," requires the Treasury Secretary to
Section 124 of the Act, entitled "Hope for Homeowners Amendments," strengthens the Hope for Homeowners program to increase eligibility and improve the tools available to prevent foreclosures.
Section 125 of the Act, entitled "Congressional Oversight Panel," establishes this Panel, with the duty, among others, to report to Congress every 30 days on the effectiveness of the foreclosure mitigation efforts under the Act.
Section 303 of the Act, entitled "Extension of Exclusion of Income From Discharge of Qualified Principal Residence Indebtedness," extends the current provision tax forgiveness for the cancellation of mortgage debt. The expiration of that act is extended from January 1, 2010 to January 1, 2013. This does not apply to insolvent homeowners or those in bankruptcy for whom the cancellation of mortgage debt is not deemed taxable income for other reasons. But this section of the Act will take away for three additional years an important disincentive for solvent homeowners to negotiate with their mortgage creditors for reductions in their loan balances .
Bottom Line: As summarized by Adam Levitin, a law professor at Georgetown Law School, in the blog Credit Slips:
As of Friday the mortgage modification amendment to the Bankruptcy Code was taken off the table by Democrats during the intense negotiations In the Capitol over the bailout bill, as announced in a closed-door meeting to Democrat legislators by Barney Frank, Chairman of the House Financial Services Committee. Despite this bankruptcy provision being one of the main provisions of Barney Frank's and Senate Banking Committee Chairman Christopher Dodd's responses to Treasury Secretary Henry Paulson's original proposal, it apparently became a "poison pill" sacrificed in order to reach compromise during the weekend. As stated by Rep. Joseph Crowley, a New York Democrat and member of the House Democratic leadership, "There is the belief we would not be able to pass a bill with the provision," There was enormous pressure to announce a final compromise among congressional and Treasury negotiators by the time the Asian stock markets began business Monday morning.
So without the mortgage modification amendment, what does the Emergency Economic Stabilization Act of 2008 (as of its form available Sunday evening, Sept. 28) contain of help to struggling homeowners? Putting aside the general benefits of avoiding the total seizing up of the credit markets, there is little if any tangible help for homeowners.
The Emergency Act establishes the Troubled Assets Relief Program (TARP) authorizing the Secretary of the Treasury "to purchase . . . troubled assets from any financial institution" through a new Office of Financial Stability, overseen by a Financial Stability Oversight Board.
Section 109 of the Act, entitled "Foreclosure Mitigation Efforts," requires the Treasury Secretary to
implement a plan that seeks to maximize assistance for homeowners and use the authority of the Secretary to encourage the servicers of the underlying mortgages, considering net present value to the taxpayer, to take advantage of the HOPE for Homeowners Program under section 257 of the National Housing Act or other available programs to minimize foreclosures. In addition, the Secretary may use loan guarantees and credit enhancements to facilitate loan modifications to prevent avoidable foreclosures.Section 110 of the Act, entitled "Assistance to Homeowners," requires federal entities that hold mortgages and mortgage-backed securities, including the Federal Housing Finance Agency (the conservator for Fannie Mae & Freddie Mac), the FDIC, and the Federal Reserve, to
implement a plan that seeks to maximize assistance for homeowners and use its authority to encourage the servicers of the underlying mortgages, and considering net present value to the taxpayer, to take advantage of the HOPE for Homeowners Program under section 257 of the National Housing Act or other available programs to minimize foreclosures.Modifications to residential mortgage loans under this plan "may include--(A) reduction in interest rates; (B) reduction in loan principal; and (C) other similar modifications."
Section 124 of the Act, entitled "Hope for Homeowners Amendments," strengthens the Hope for Homeowners program to increase eligibility and improve the tools available to prevent foreclosures.
Section 125 of the Act, entitled "Congressional Oversight Panel," establishes this Panel, with the duty, among others, to report to Congress every 30 days on the effectiveness of the foreclosure mitigation efforts under the Act.
Section 303 of the Act, entitled "Extension of Exclusion of Income From Discharge of Qualified Principal Residence Indebtedness," extends the current provision tax forgiveness for the cancellation of mortgage debt. The expiration of that act is extended from January 1, 2010 to January 1, 2013. This does not apply to insolvent homeowners or those in bankruptcy for whom the cancellation of mortgage debt is not deemed taxable income for other reasons. But this section of the Act will take away for three additional years an important disincentive for solvent homeowners to negotiate with their mortgage creditors for reductions in their loan balances .
Bottom Line: As summarized by Adam Levitin, a law professor at Georgetown Law School, in the blog Credit Slips:
The plan directs the Treasury Department to engage in reasonable modifications for residential mortgage loans it controls and to encourage servicers to do so for loans it doesn't control. . . . Treasury is unlikely to end up controlling many distressed residential mortgage loans directly. And Treasury has been encouraging servicers to do loan modifications since last fall, but with very limited success. There is no reason to think that the bailout suddenly changes anything. In short, Congress enacted some show provisions about consumer relief, but nothing of substance.
by: Andrew Toth-Fejel
Bankruptcy Litigation Support for Attorneys
Andy@BLSforAttorneys.com
Bankruptcy Litigation Support for Attorneys
Andy@BLSforAttorneys.com
Please note that this writer is not licensed to practice law in Oregon. This means that he is not legally permitted to give any legal advice or provide and legal services. This Bulletin and the entire contents of this website is written only for attorneys. and is not intended for the public. If any non-attorney is reading this, you must consult an attorney about ANYTHING you read here. Nothing in this website is intended to be nor should be read as being legal advice to anyone.
© 2008 Bankruptcy Litigation Support for Attorneys
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