Legislation that would have allowed for bankruptcy court-supervised loan modifications in some limited circumstances, sometimes called lien stripping, was stripped from the Wall Street bailout bill in Congress this weekend after protests from the mortgage bankers. The Center for Responsible Lending had predicted that the proposed legislation would have resulted in 3,587 fewer Kansas homes lost in foreclosure and $96 million in home values and tax base saved.
The foreclosure epidemic is estimated to reduce the values of 200,403 Kansas homes by an average $1908 this year and next, according to estimates by the Center for Responsible Lending.
CRL is projecting 14,347 Kansas homes to be lost in foreclosure by the end of 2009, causing a decrease in home values and tax base is projected to be $382 million.
Chapter 13 bankruptcy home loan modification to reduce the debt to the real estate value was originally included in the Wall Street bailout legislation but has not been removed. The Wall Street bailout will not assist home mortgage borrowers.
Modification of real estate mortgages is allowed in chapter 13 bankruptcy except for loans secured by mortgages on principal residences. Owners of rental properties, vacation homes, commercial real estate and farms can reduce their debt down to the value of the real estate and modify the repayment terms in chapter 13 bankruptcy, but homeowners cannot. Modification is not available in chapter 7 bankruptcy.
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