Debt Consolidation Through Bankruptcy and A Little Help From Your Mortgage Lender

[Jan 9, 2009.]

 

If you ever plan on Debt Consolidation by way of bankruptcy you may have more options around your mortgage than you once did.

In a move that would help troubled homeowners, Citigroup agreed to support legislation that would let bankruptcy judges adjust mortgages for at-risk borrowers, leading Congressional Democrats said on Thursday January 8th, 2009.

Citigroup, which is receiving more than $300 billion in bailout assistance, says that it is open to measures that would help homeowners and they should be given their circumstances/

The revised bill that Citigroup endorsed would allow bankruptcy judges to adjust the principal payments or interest rates on existing loans.

Judges could also extend the terms on mortgage loans, according to the bill, which would force lenders to take losses without a say in bankruptcy court proceedings.  Now this may seem aggressive but in light of recent events around the financial markets and the bailout helping these financial institutions so much, this may be just what is needed to solve many debt consolidation problems homeowners face.

Citigroup had been part of the Bankruptcy Coalition of the Financial Services Roundtable, an industry group, since it aggressively lobbied for changes to the bankruptcy code in 2005. The coalition is a group of major trade associations and lenders like Bank of America, JPMorgan Chase and Wells Fargo; also fought to block the so-called cramdown legislation last year.

No other bank has broken ranks with the industry on the proposed bill. One Senator said he hoped the move by Citigroup would lead to backing by enough Democrats and moderate Republicans to push the bill through.

Backed by bankers and other financial groups, many Congressional Republicans and some Democrats have balked at the plan to let bankruptcy judges alter mortgage terms on primary residences, saying that would drive up mortgage costs.

Some money versus no money is what is has come down to for bank officials.  These forced modification might be just a small step to greater cash flow and recovery in the financial world but it is a step none-the -less.

Source: New York Times

 

About Author:

Brent Lane is a Mortgage Consultant in Roseville, California. He helps homeowners in California with their mortgage financing and writes on his BLOG at www.thelanegroup.blogspot.com