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Is the President’s Mortgage Modification Plan fair to those who pay?

Posted on Feb 22, 2009 in Uncategorized

Most people struggle to pay their mortgages.  They do so even if their homes have lost value — even if they are “upside-down” on their mortgage.  Why?  They can afford it.  They like their home.  If they abandoned their home, they would owe big money to the lender.  They stand to lose a lot in bankruptcy.  We at Lakelaw sympathize with people who can pay and do against all odds.  We understand.  We’ve lost money on our home as well and keep paying anyway to protect what equity remains.

Here’s the point.  We all suffer because of the collapse of the housing market.  My neighbors problems cause my home goes down in value.   So I want, and we should all want, a normal market in residential real estate.

In the meantime, we are on top of the rapidly changing mortgage modification scene.  We know how to help you and we will.

President Obama’s plan doesn’t save every homeowner.  It will only save some.  Check out the Treasury Fact Sheet.  And others will only get help for a period of five years.  The point of the plan is to put some brakes in the free-fall of the housing market.  The mortgage modification amendments to the bankruptcy code won’t be a permanent thing either.  It will apply only to current mortgages, and according to President Obama, only those made in the “past few years.”  It won’t apply to mortgages obtained by fraud.  It won’t “wipe out” the mortgage either. It will convert some of the mortgage to unsecured debt which must be paid in a chapter 13 plan over a period of up to 5  years.  And as it presently stands, the mortgage modification bill would allow a lender to share in any appreciation that the homeowner might be fortunate enough to enjoy over the next five years.

We hear lots of complaints about “moral hazard” and “unfair to those who pay.”  But what we don’t hear is any constructive solution.  Doing nothing and “letting the market work” will result in staggering deflation, paralysis of the real estate market, and millions of homeowners with little or no incentive to pay a staggering debt on a house which no longer has significant value.

In the meantime, we are on top of the mortgage modification scene.  We know how to help you and we will.

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