Attorney Generals Urge Congress For Loan Modifications

State attorney generals of 21 states are pushing Congress to amend bankruptcy laws to help homeowners prevent foreclosures.

The Attorneys General note in their letter that despite the best efforts of state and federal government regulators to engage servicers in voluntary loan modifications to avoid unnecessary foreclosures, further action to spur meaningful modifications must be taken.

Under the amendment supported by the Attorneys General, losses and benefits would be shared between homeowners and investors. If a federal Bankruptcy Court ordered a loan modification, the homeowner would be required to pay the loan based on the current secured value and the mortgage holder may be required to absorb the unsecured portion of the debt, which exceeds the value of the home.

Homeowners with regular income will retain their home while paying a sustainable mortgage. The mortgage holder receives a steady stream of income, while avoiding the losses and expenses incident to a foreclosure sale. Communities benefit from avoiding the blight of foreclosed properties and deteriorating neighborhoods.

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