The Mortgage Guru

What do you think Las Vegas?? Congress just shot down a bill which could have potentially saved over 38,000 homes in Nevada. Let’s look at the details…The proposed bill would have allowed bankruptcy court judges to modify the terms of residential mortgages for owner-occupied properties just like they do for vacation homes. Senate Majority Leader Harry Reid, D-Nev., who supported the bill blames the banks for the failure in Congress and was quoted as saying “I hope the banks are proud of themselves. What they have done to our country. And now they are standing in the way of our trying to help a little bit, trying to help people who have a home and they cannot get any relief.”

Citi backed the bill but other large banks warned the legislation would make home buying more expensive because in order to recoup losses banks would need to increase interest rates and require more money down. (Wow! just like in the 1980’s…and I seem to remember we did not have a housing crisis in this country when you were actually required to qualify and put 20% down on a home, hmm)

Here’s another bit of information which may help to shed some light on this…the banking industry spent tens of millions of dollars lobbying Congress in the past year. These same banks are now receiving your tax dollars from Congress to bail them out because they are “too large too fail.” So what’s the motivation for the banks to shoot down a bill that would keep homeowners in their homes? They can spend millions upon millions of dollars lobbying to Congress but they say they cannot afford the losses if bankrupcty judges modified loans and would need to raise interest rates to recoup these predicted losses.

On the flip side the bankrupcty provision could have allowed any homeowner to stop paying their mortgage, file for bankruptcy and get a lower payment. So is it fair that your neighbor could cut a deal just by filing for bankruptcy? Where would it end?

That gives you a lot to think about doesn’t it? What do you think Las Vegas? Send your comments to mgarnes@garnesmortgage.com I would love to hear from you.

Tags: foreclosure //