Coakley's On Track With Mortgage Mitigation
The present decade may be remembered as one in which common sense was put aside in the mad pursuit of easy wealth.
Drive anywhere in Central Massachusetts and the results — vacant houses and the stories of homeowners bilked into unfair and impractical mortgage arrangements for wildly overvalued houses — are plain to see and hear.
And while many homeowners have only themselves to blame for signing risky mortgages, state Attorney General Martha Coakley has recognized nearly from the beginning that a great many more were the prey of lenders whose only concern was feeding their own coffers, creating a Wall Street beast on its way to utter meltdown.
The Right Approach
Now, Coakley and 22 other attorneys general from around the country, have signed onto what may be the most common sense approach yet to remedying the ongoing mortgage crisis.
The attorneys general last month drafted a letter to the U.S. House of Representatives and the U.S. Senate asking the lawmakers to amend U.S. bankruptcy law to allow bankruptcy judges to order loan modifications for qualified, at-risk mortgage holders. The amendment would allow bankruptcy judges to readjust debt owed on primary residences just as they may for vacation homes and family farms.
Under the proposal, loan losses and proceeds would be shared between homeowners and mortgage holders. Homeowners would be required to pay the loan based on the current and more realistic secured value of their homes and the mortgage holder would absorb the losses for the portion of the debt that exceeds the true value of the home.
Homeowners stay in their homes while paying a steady, realistic mortgage and the mortgage holders get a steady income based on market-rate interest while avoiding the losses that come with foreclosure.
The effort to amend U.S. bankruptcy law comes at the most opportune time for Massachusetts and Worcester County, one of the counties hardest hit by the so-called mortgage crisis.
To date, all other state efforts to convince lenders to voluntarily rearrange at-risk mortgage have failed, as Coakley admits. Similar federal efforts, especially the “Hope for Homeowners” program, have also failed. The U.S. Department of Housing and Urban Development recently reported that it had received only 111 applications for the Hope for Homeowners program nationwide.
Also, the state’s housing market has begun showing signs that it may be at least approaching bottom.
Massachusetts home sales actually increased in three of the last four months of 2008 as prices continued to fall toward a five year low approaching their level before their rapid inflation.
Coakley’s efforts could go a long way toward both keeping homeowners in their homes and making it easier for homebuyers to put foreclosed properties back into equity ownership.
The way we got into this mess is also the way out — stability in the housing market is the foundation to turning around our struggling economy — and actions like this are critical to supporting and nurturing that turnaround.
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