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Banks Scramble to Prevent New Law Addressing Foreclosures by State

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By : John Cutts    99 or more times read
The new bankruptcy law that is set to pass legislation would let judges cut down interest rates and reduce values of principals for home loans in a bid to curb foreclosures by state. This bill has been in the drawing boards for two years and failed to see light as Republicans and the Bush administration have opposed the change. Now that more Democrats are taking seats in the House, and President Obama giving his support, the new bill is scheduled to pass legislation.

The proposed bill is facing tremendous opposition from major banks and the mortgage industry. However, with the probability of the bill becoming law on the high side, these major banks are changing their tactics and approach and are now trying to influence the revision on some key revisions.

Proponents of the bill are confident that these changes will force banks and mortgage providers to work with homeowners to try and modify their loans and prevent foreclosures by state. This would be a good alternative to settling the mortgage issue in the bankruptcy court. However, the contention of mortgage industry experts is that this new bill will eventually result in higher interest rates and processing fees. The new bill will create greater risks and unpredictable costs for banks and mortgage companies and they will have no resort but to pass this to the consumer.

President Obama has already declared the new law as part of rescue program for the foreclosure crisis, and this is strongly supported by Democrats and other consumer advocates who believe the new law is crucial in stemming the tides of foreclosures by state. With this majority support, the new bill is most likely to pass legislation despite continuing opposition.

Banks have no resort but to bow to the political pressure scram to get a seat at the decision table. Citigroup has taken this step and have cut a deal with Democrats that the new law would apply only to existing loans before promulgation, and would apply only to homeowners facing foreclosures by state who are actually working with their mortgage providers for loan modification before resorting to Chapter 13. Other banks are proposing a limit to the kind of home loans the law is applicable, although they still continue to oppose the bill - the same bill, which they spent millions to block last year.
John Cutts has been educated in the finer points of the foreclosure market over 5 years.

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