“Mortgage Deal”

Posted by kevin on March 5, 2011 under Foreclosure Blog | Comments are off for this article

Last week, an article ran in the major newspapers that the Obama administration is negotiating a multi-billion dollar deal the mortgage loan servicers which would allow for mortgage modifications which reduce principal amount due on mortgage loans.  The “deal” would not create government programs to reduce the principal but would rely on the lenders to make the reduction.

It goes on to say that any settlement would entail that lenders, servicers, federal regulators and state attorney generals all get on board.  This is a diverse group with competing interests.

My take.  Don’t hold your breath.  The lenders and servicers are going to do nothing meaningful on their own accord.  They may promise to cooperate and act in good faith, but nothing in the history of mortgage modifications indicates that they will act in good faith.

The Obama administration will push this for a few months.  Then, they will get distracted with the 2012 election.  The mortgage crisis will become a lesser issue especially if unemployment rates go down.  The Republicans will not push the issue because it’s not their issue.

Besides the lack of political courage necessary to make such a deal, the main problem is that the Obama solution calls on the servicers/lenders to run the program and determine who gets principal reductions and how much.  That is not a comforting thought for a person in foreclosure.

As I have maintained all along, the Administration blew it when they jumped off board on the mortgage cramdown legislation.  If bankruptcy judges were given the ability to reduce principal on mortgages involving residences in a Chapter 13, we would have had about 18 months of litigation.  Then, decisions would crystalize the law, and the landscape for settlement would be painted.  The rules would be set.

Our best hope are that the federal regulators (who let this happen) will do their jobs and the state attorneys general will kick some butt.  That will start to push the lenders/servicers into a corner.  Then, we may force a solution.  In the meanwhile, I advise to continue the fight to make the best deal for yourself.