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Foreclosure Freeze Reported To Harm Security Clearance

By Susanne Robicsek, North Carolina Bankruptcy Attorn

Foreclosures have been frozen as lenders are purportedly investigating problems with mortgage documents.  I wrote an article last week Foreclosures Stopped by Bank of America: Not Always Good News outlining some of the problems that people may run into with the freeze.   In an article in the Washington Post Foreclosure freeze could put security clearances at risk , the writers Dina ElBoghdady and Dana Hedgpeth examine how security clearances may be affected by borrowers put into financial limbo by a foreclosure freeze on their property.

Some people think that  problems with mortgage documents will lead to someone saying that the mortgage will be canceled and they will own their home free and clear.  It is highly unlikely that this will happen, and certainly impossible that it will happen to everyone whose mortgage documents are suspect.  More likely is that people will get further and further behind on payments and eventually lose their home if they can’t catch up, negotiate a modification, or file for  bankruptcy.

Straightening out the mortgage documentation iss about requiring the mortgage lenders to follow the law, but borrowers also have debts to repay that need to be dealt with.  Ultimately if borrowers are behind, what they want is a solution to help them keep their home  and they want to be treated fairly.  Figuring out who owns the notes so homeowners know who to negotiate with would help a lot.  Holding mortgage lenders to proving the accuracy of their accounts is critical.

The more homes that are foreclosed upon, the lower everyone’s property values drop.  Buyers are afraid to buy because the market isn’t stable.  People have lost their life savings in any home equity they used to have.  Homeowners are living in homes that are worth thousands upon thousands of dollars less than what they owe.  Owners with negative equity are in a position where they can’t sell the house  if they wanted or needed to do so.  Modification of mortgages to reset the terms, lower interest rates and  putting homeowners back on track would do a lot to slow down the foreclosure spiral.

Unfortunately, the freeze won’t solve this mess, and is hurting some borrowers while providing a temporary reprieve for others.

see also:

Chapter 13 bankruptcy is the type of bankruptcy most people look to to help them stop foreclosures and cure their mortgage through monthly court payments.   Doug Jacobs wrote a good article describing this in Mortgage and Bankruptcy: Save Your Home!

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Full post as published by Bankruptcy Law Network on October 22, 2010 (boomark / email).