Bankruptcy Attorney Blog Archives

Properties posted for sale in forclosure auctions have spiked across the country in April. Atlanta’s 13-county metro area topped 10,000 lender-owned properties. In Texas, the number of properties posted for sale in April is up 32 percent from April 2008 and 27 percent from February numbers in Tarrant County - which includes Fort Worth and Arlington. 

Experts say it is a temporary jump that can be attributed to the end of moratoriums placed on foreclosures by government mortgage backers Fannie Mae and Freddie Mac.

The firms halted foreclosures to allow Congress to formulate a plan to slow foreclosures, but the Senate has stalled a bill that would address the issue because of a provision that would give bankruptcy judges the authority to modify the interest rate and principle owed on a mortgage.

Banking industry groups have fought the measure saying that it would drive up mortgage rates. 

A story about the rise in foreclosure rates that appeared in The Fort Worth Star-Telegram quotes George Roddy, president of a company that tracks foreclosures in Texas, as saying that lenders “have some kind of motive to open the floodgates.”

Bankruptcy attorneys have long called for bankruptcy judges to be allowed to modify mortgages on first homes in a Chapter 13 bankruptcy proceeding.

Affordable housing advocates say that for homeowners who owe more than their home is worth, the measure would provide an incentive to stay in the home and keep making payments.

A  survey conducted by the Mortgage Bankers Association shows that a record 5.4 million American homeowners with a mortgage of any kind, or nearly 12 percent of all mortgage holders, were at least one month late or in foreclosure at the end of 2008. That is 10 percent jump from the end of the third quarter, and an 8 percent jump from the end of 2007.

In a sign that the economic turmoil wrought by the housing market is spreading, states that were the epicenter of reckless lending practices, like Florida, California and Nevada, are no longer driving the nation’s delinquency rates up. Defaults are now spiking in states like Louisiana, New York, Georgia and Texas, where the economies are deteriorating and thousands are losing their jobs.

Per capita bankruptcy filings in those states are still high, showing that some debtors are trying to take advantage of property exemptions to try to keep their homes.

Nevada and Georgia are second and third in those rates, according to a report issued by the United States Bankruptcy Court.

Bankruptcy rates are expected to spike once Congress approves a measure that would allow bankruptcy judges to lower the principal or interest on a mortgage. Opponents of the measure have so far succeded in slowing its passage, but it is expected to become law sometime this week.

Democrats in the House of Representatives, under pressure from a group of moderates in their ranks and the banking lobby, agreed to restrictions on legislation that would give bankruptcy judges the power to change the terms of a mortgage by the reducing interest rate or principal. 

The legislation, which the House could vote on by Thursday, will require the judge to consider whether a homeowner had been offered a reasonable deal by the bank to rework his or her home loan before seeking help in bankruptcy court. It also puts the responsibility on borrowers to prove that they tried to modify their mortgages.

The measure is another piece of President Obama’s plan to stabilize the housing market and reduce the number of foreclosures. It follows several initiatives aimed at getting banks to modifiy mortgages for distressed homeowners who are in danger of losing their homes.