The federal government’s attempt at stemming the foreclosure crisis has been a complete failure.
Consumer Bankruptcy News reports in their April 7, 2011 edition that the Congressional Oversight Panel “officially ceased to exist on April 3. Created to oversee how the U.S. Treasury Department spent money through the Troubled Asset Relief Program, COP’s final report expresses disappointment in the government’s foreclosure mitigation response.”
The word “disappointment” in reference to federal efforts is a major understatement. I have met with bankruptcy clients from Rome, Dalton, Dallas, Hiram and Cartersville, Georgia who were completely devastated when they were informed by their mortgage company that their loan modification was not approved.
Many consumers are angry at Congress because millions of dollars were set aside to help people like them but the promised help was never delivered. Many others are furious at their mortgage companies because they feel like no one really wants to help them in any way. It will be interesting to see how this voter anger plays out in November.
Its too bad that the Mortgage Modification bill never passed. Under this bill, bankruptcy judges would have been given the power to modify mortgages and lower future mortgage payments based the real value of the house. Passage of this bill would have prevented the foreclosure crisis because debtors would have been able to stay in their homes with lower mortgage payments. The best part would have been that this program would not have cost the American taxpayer any money.
Instead, “685,574 homeowners are being assisted by foreclosure prevention programs funded with $1.2 billion in TARP Money” (Consumer Bankruptcy News, page 4). The bad news is that the vast majority of people who applied for federal help never received it.
The good news is that Chapter 13 can stop foreclosures. Past due mortgage payments can be put into a plan and spread out over five years.
However, it is important to note that Chapter 13 does not lower your future mortgage payments. As a result, if you are in a situation where your mortgage payments is too high, Chapter 13 may not be the answer.