Bill to allow judges to lower mortgage amount instead of foreclosure

by February 22, 2008 • 5 comments


In an effort to reduce the number of foreclosures this year and next year by an estimated 600,000+ households, there are two bills before Congress that would grand “judges the authority to reduce mortgage debt.”

The two bills only apply to borrowers that live in their homes and have either subprime mortgages or other non-traditional mortgages, such as interest-only loans.

“It is one of many efforts by government and consumer groups to encourage lenders and mortgage servicers to restructure loans to more affordable terms for home owners in danger of default.”

Lenders, of course, are in an uproar with this claiming that this would increase mortgage costs for everyone because of the “bad bets” of a few. Proponents say these types of risky loans should have not been available in the first place.

What an interesting relationship. The borrowers don’t want to take responsibility for something they knowingly signed up for and claim that someone else shouldn’t have let them do it, and the lenders don’t want to take responsibility saying the consumer should not have bought that expensive house and need to suffer the repercussions or they will keep making bad decisions. Interesting indeed.

What do you think? Does the responsibility lie with the borrower to not take out a risky loan? Or does the responsibility lie with the lender to not offer the risky loan in the first place.

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1 jim sands February 25, 2008 at 7:45 am

Unfortunately, the mortgage mess has gone beyond any one individual. Where was the government oversight on the credit industry….the lifeblood of our economy?

Certainly there were a number of mortgage brokers who misled people(not everyone can interpret the myriad of documents that are required to be signed). There are equally a number of people who knew what they were getting into, but just hoped that they could flip and make some money.

Bottom line…..
Any lender who made a teaser loan without taking into account the borrower’s ability to repay at the new higher interest rate, should be stuck with the loan rate that orignally matched the borrower’s ability to pay.


2 Scott Reed-Coral Shores Realty-Realtor February 25, 2008 at 8:34 pm

We can keep on blaming whomever we won’t to, but it doesn’t do anyone anygood. That seems to be the problem with this country, everyone wants to blame someone else for their own behavier and bad habits and we never get anywhere with the problem. I think the government should pass a bill requiring lenders to convert interest only loans to (half of their regular payment and to extend this for another 5 years on the loan to give Sellers time to sell their properties.) A lot of Buyers could hold on that can’t convert and maybe sell their property before going into foreclosure. We don’t need all of these foreclosures and short sales. It is just making property prices fall more and more every month and every year. The problem is that there are more properties for sale than people to buy. With the media and different people on TV telling everyone how bad it is……no one is willing to Buy. One lady on TV tells everyone to offer HALF price of what a Seller is asking. Now if you have been in Real Estate or keep up with it any and have just a little sense, this just doesn’t fly. Just about everyone I talk to is looking for a big WINDFALL in their hands, A really Good Deal, something at half price. And yea, some properties are sold at half price. But it is more likely 1 in 10,000. You can’t hardly sell anything to anyone because no matter what price you come up with, the Buyer thinks it is too much. All Buyers want to know if it HAS BOTTOMED out yet. The answer: it depends on where you Buy. Some properties are selling for a little more today than last year and others are not. Probably because they were priced too high to begin with. If the media would shut up and the Government get on the ball, we could slowly get out of this. Note: when you are ready to buy a home, do this; get pre-approved(this will usually last 120 days with your lender),things are tighter now and you might not be able to afford what you could previously,you have got to have a good credit score to get good financing, work with a Realtor and find out what homes in the neighborhood are selling for, what they have to offer, what the ones sold had to offer, and what new home sales are. Building a new home can be costly, just for the home can be around $175 to $185 per foot and up not including the lot. Consider Buying an older home (fixxer-upper)in the right neighborhood.Look for a good layout and remodel it to your liking. Well I could go on and on……Take care and best of luck to everyone in this mess.
Coral Shores Realty
Scott Reed- Realtor
Panama City Beach, Florida


3 David February 26, 2008 at 9:57 am

It’s called responsibility. The home-owners that took the loans have a lot of it…. the lenders share in that responsibility. Why should the rest of the country have to bail them out.

We have a free market in this country…. until the politicians screw that up…… the market will correct. The housing boom was a result of the government & fed setting policies, and guess what, their fix won’t make anything better.

Everything will need to sort itself out, and it may be painful, but keep the government out of business or it will get worse.


4 Eino Lehtio February 27, 2008 at 10:11 am

Historically lenders have controlled lending based upon financial data on the borrower. If a prospective borrower wanted to buy a property he/she could not afford, based on the data, the loan was denied. Suggestions regarding methods to improve credit standing were often given, but the loan was denied!


5 Scott Reed April 3, 2008 at 10:38 am

Well just like I told people not to buy Flip properties when the Bubble was about to burst, I am telling you now that if you are in the market, you should Buy now. There are good deals on the market, Interest rates were dropped to produce more purchasing power and sales are slowing rising. This will increase and once enough properties have sold in the market, the Interest Rate will start to go up. Belive IT OR Not! It will happen. If you buy now, you will be able to afford a larger home for the money. There are a few investers buying up properties in Bay County right now just because they are informed. Don’t get left out again. If you have good credit and the ability to invest long term, you should do so. Don’t wait until later and say, I Wished I had done that.In my opinion Procrastinating always loses.