Foreclosure real estate

Attorneys saw their bankruptcy business slow down after the bankruptcy laws were changed by the government in favor of the credit card companies and most creditors in general. In order words the laws were now stack against the borrower. Due the current home foreclosure crisis the government is now amending the bankruptcy laws to allow the trustee to get some principle reduction or restructuring for the homeowner.

After this brief slow period the attorneys experienced once again a boom in bankruptcy filing, but now the attorneys have added the filing of a possible loan modification. Loan modification could be needed because homeowners are dealing with mortgages that were created in good times with weird guidelines.

When these mortgages went bust in early part of the recession lenders counting on the increase of the equity to cover any lost sustain in a home foreclosure. However, when the housing bubble burst the opposite occurred, property values fell hard.

So with the table turn on the bank they found it difficult to recoup any loss. Real estate as always been a sure bet in the past and banks did not consider that they would take such a nose dive. Typically under normal economic environment homeowner could do a mortgage refinance when they got in trouble. However, these toxic loans push these homeowners to save their loans with loan modification. The lenders finally had to request for help from the government hoping to survive this wave of bad loans; they did not see this coming.

Bankruptcy was an option in the past for homeowners facing foreclosure. Therefore, filing chapter 13 not only stopped foreclosure but could help with debt consolidation. However, now we were dealing with a different types of loans that when went bad they were difficult for the homeowner to handle. For example the sub prime loans came with adjustable rates that would push payments out of the reach of the homeowner. Bankruptcy could not stop that. Most of these borrowers could not refinance into a prime rate mortgage because of their credit or income data.





Another type of loans that went bust was the option arm loan which was structured with an introductory rate as low as 2.9% with a potential increase of additional 6 percent over the life of the loan. Therefore if you started with a rate of 2.9 with an index of 4.5, your effective rate would be 7.40 but you were only require to pay each month the 2.9 interest only. These option arms created a negative amount each month because the borrower was not paying the fully indexed mortgage rate each month based on the 7.40. Therefore, under the prefect conditions these loans could work but with the Libor and Treasure index going up this created a run away mortgage.

Attorney’s across this country is now in demand working with homeowners fighting foreclosure using not only bankruptcy but loan modification. Filing bankruptcy has its limitation, because of loss of equity with homes values falling. Loan modification would not only create a fix rate but increase the numbers of years to pay off the loan. Hopefully the new bankruptcy laws will allow the bankruptcy trustee to obtain such restructuring.