From Realtor Magazine Online, Daily Real Estate News January 13, 2009
Federal bankruptcy judges support proposals to allow them to restructure first mortgages for struggling debtors.
"The bankruptcy system depends on people making deals, but the deal-making piece of it has disappeared when it comes to mortgages because of the way mortgages were sold and packaged," says Samuel L. Bufford, a U.S. bankruptcy judge in Los Angeles. "There's nobody on the lender side to do the deal unless you [get permission] from investors, and that's impossible."
Until 1979, when the U.S. bankruptcy code went into affect, judges overseeing bankruptcy cases could modify primary-home mortgages. Judges who recall those days say the system worked fine then and would be beneficial now.
A. Jay Cristol, a federal bankruptcy judge in Miami, says that changing the bankruptcy law is the right thing to do because "after foreclosure, families get broken up and lenders hold on to nonperforming assets that they sell at a loss."
Source: The Wall Street Journal, Amir Efrati and Jennifer S. Forsyth (01/12/09)
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