With Congress considering modifications to the Bankruptcy Code and the President encouraging mortgage companies to freeze interest rates on adjustable interest rate mortgages, some much needed changes are beginning to appear on the mortgage scene for tapped-out consumers. Mortgage companies are voluntarily agreeing to interest rate reductions for consumers proving financial distress. Mortgage companies are also willing to discuss turning adjustable rate mortgages into fixed rate mortgages.
Part of the mortgage companies' willingness to alter the terms of their oppresive mortgage loans may be a bill sponsored by Richard Durbin, a Untied State Senator, which would permit debtors to alter the terms of home mortgage loans in Chapter 13. For over 30 years, home mortgage loans have not been modifiable in Chapter 13, in part due to the nature of the lenders (small, local banks which would be reluctant to lend money for home mortgages if the loan terms could be altered). The current mortgage lending world is much different than it was 30 years ago. Now, large securitized trusts, with investors, provide the bulk of the mortgage lending market. These lenders can support greater risk and do not deserve the same protections afforded to mortgagees of the past.
Whether the goodwill being spread by current lenders continues remains to be seen, particularly after Congress determines the fate of Senator Durbin's bill. At this time, consumers in financial trouble should discuss altering the terms of their loans with their mortgagees.