The chairman of the House of Representatives Financial Services Committee said that he plans to keep working on legislation to reduce mortgage balances via bankruptcy proceedings, and that the lame performance of lenders, some of which received taxpayer bailout funds and have yet to modify a single mortgage, increases the support for that legislation. "The best lobbyists we have for getting bankruptcy legislation passed are the servicers who are not doing a very good job of modifying mortgages," Representative Barney Frank asserted in a subcommittee hearing. "If they do not improve their performance then they improve their chances of that legislation."
So if your lender is dragging its feet and you are pulling your hair out trying to get your loan modified, you may soon have the US Bankruptcy Court on your side. Today, while filing for bankruptcy won't stop a foreclosure forever, it does create what is called an automatic stay. The lender has to show a judge why that stay should be lifted before it can go forward with foreclosure proceedings. And if the lender is too busy to return phone calls or take care of its regular business, odds are good that it may not want to have to go to court to prove that you owe and can't possibly pay.
If you show that a Making Home Affordable modification would make your payment feasible, especially if your other obligations are discharged through a bankruptcy, the judge may well put an end to your foreclosure woes. Try running the numbers through mortgage calculators--if by dropping your rate to 2% your housing expense would be reduced to 31% of your gross monthly income, you have an excellent chance of keeping your home. But if your income has been reduced to the point that you can't even come close to affording your home, the lender will likely be allowed to foreclose.
