Today the House approved a bill (234-191) that would give bankruptcy judged authority to dictate, I mean change, the terms of the loan for home owners that are under water or upside down on their mortgages.

Simply stated, it means the borrower owes more on his home than what the current market value of the home is.

Bankruptcy judges will have the ability (assuming it passes the Senate) to wipe out the portion of the debt that is under water. For instance, if John Smith took out a 200,000 mortgage to by his home in 2005, but current market conditions now dictate that the homes value is now 140,000 the judge can adjust the mortgage, payments and interest, to reflect the current market value of 140,000.

First let me say to the 92% of Americans that pay their mortgages on time and bought homes they could afford, sorry suckers you should have have purchased bigger homes in more affluent areas.

This is wrong on so many levels I can hardly determine where to begin. First and foremost judges are just that…judges. They are not accountants, bankers or realtors. The banks that hold these mortgages can’t not realize these losses.

What does that mean for you and me? It means banks will have to charge higher fees to other customers to defray the losses. For those banks that can not recoup losses solely through fee and interest rate increases, more government intervention in the form of bailouts may be needed again with funds coming from you and I.

How many smaller banks, not currently receiving tart money, will be forced to ask for bail out funds because of the millions, possibly billions, lost as judges write off large chunks of these mortgage notes? Moreover, I contend that they keywords everyone seem to be overlooking is current valuation. Anyone who has ever purchased stock knows that what goes up must come down and what goes down must come up.

Have any of the bureaucratic bubble heads that pushed this bill through thought about that. For example if John Smiths home was purchased for 200,000 in 2005 and in 2009 the current market value is 140,000 and the honorable moronic judge now says, “that’s ok John, you now only owe the bank 140,000 and here are the new terms of your loan,” what happens 3,4 or 5 years down the road when the housing market rebounds and Johns home is now valued at 225,000, and he decides to sell.

He mortgaged 200,000, screwed the bank or taxpayers over to the tune of 60,000 and now has a realized gain on the sale of his home of 85,000. Note that most likely no monies will be recaptured through taxes because if this is a home he has resided in for more than 2 years capitol gains taxes are not applicable.

Furthermore what about the mortgages that are upside down but the mortgage notes are not held by banks but rather the former owner of the home?? This is a contract law nightmare, with judges essentially having the ability to nullify contracts.These individuals are now going to be seeing judges renegotiate the terms of mortgages they personally hold.

I contend that these people, for the most part, do not have the financial where with all to be able to tolerate a 50, 60 or 70 thousand dollar loss. Money owed to them that a judge just wiped out with the stroke of his pen. For all you folks that hold owner financed mortgages here it comes … without any Vaseline. Welcome to the Obamanation!

Technorati Tags: Foreclosure, governement bailout, Mortgage

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