Modification of First Mortgages in Chapter 13 . . . reality of just more of the same

Currently Senate Bill 61 known as "Helping Families Save Their Homes in Bankruptcy Act of 2009" sponsored by Richard Durbin (D-IL) is the latest and by all sources potentially the most likely bill to pass into law a procedure by which Chapter 13 debtors would be able to modify their current mortgage.

The current version (as of the date of this article) would provide the debtor the ability to extend the mortgage to a period of 40 years (reduced by the number of years the mortgage has been in existence), provide for a fixed interest rate in an amount equal to the "most recently published annual yield on conventional mortgages published by the Board of Governors of the Federal Reserve System, plus a reasonable premium for risk (sounds like a Till analysis, possibly 2 %), the waiver of a pre-payment penalty, and most importantly removing the restriction on the filing of a motion to determine secured status on a principle residence.

As the bill currently reads, one would be able to now value their principle residence, reduce the principle amount owed to that value, adjust the interest rate of the mortgage, and extend the time period in which to pay the mortgage.

The bill was referred to the Senate Judiciary Committee on January 6, 2009. There are no Florida Senators that sit on that committee.

(If anyone is interested in e-mailing their comments on this pending legislation to a member of the committee follow this link http://www.govtrack.us/congress/committee.xpd?id=SSJU)

As this is possibly the most important bill to affect bankruptcy since the 2005 reform bill I will try to keep you up to date as the bill progressed through Congress.