The Wall Street Journal recently reported on a mortgage company regulation bill that is working its way through Congress (Click here to read the article). The Journal reports that mortgage companies are lobbying Congress to “soften a series of provisions that reshape how most Americans obtain home loans.”
The bill proposes:
1. To require lenders to hold 5 percent of the loans they originate that are sold to investors as securities;
2. To give borrowers greater protection when the mortgage process breaks down; and
3. To force mortgage companies to charge all origination fees upfront or reflect them in the mortgage interest rate but not both.
I think we will most likely see some type of mortgage reform come out of Congress before the November elections. In response to the mortgage meltdown of 2009, Congress is going to pass laws forcing mortgage companies to take a much closer look at potential home buyers before they are given any mortgage loans. The Journal reports that the current proposed legislation “would require lenders to ensure that borrowers can repay their loans and to prove that any refinancing provides a ‘net tangible benefit’ to the borrower.”
The end result is going to be that obtaining a mortgage in the future will be much more difficult than it has been in recent times. Because of these new stringent requirements, some people who are considering surrendering their house in a foreclosure may want to think twice before letting the house go.
Houses can be saved from foreclosure by filing a Chapter 13 bankruptcy. A Chapter 13 can eliminate credit card debt, medical debt and any other type of unsecured debt. Furthermore, any mortgage payments that have been missed can be put in a Chapter 13 plan. In some cases, Chapter 13 can make it easier to pay future mortgage payments because you no longer have to worry about credit card payments or medical payments.
One of the cruel side effects of the new legislation is that some people who have owned homes in the past will never be able to buy another one in the near future. Self employed applicants who have extreme income fluctuations throughout the year will have a difficult time complying with the new standards.
Any person in Georgia who is considering surrendering their house in foreclosure should first meet with a local bankruptcy attorney. It cannot hurt to explore all of your options.