Bankruptcy and Foreclosures

Advocates and Actions Financial Justice Foreclosure

New Orleans In Phoenix this week 35 members of Advocates and Actions did an bankruptcyaction on the new “field office” of Fannie Mae to a lame response despite camera crews from five stations whirring away.

It was more heartening to read that the Justice Department was using the angle of its authority over bankruptcy law to review the way banks have processed Chapter 13 bankruptcy proceedings to uncover yet more mess and mischief in the mishandling of foreclosures.   Justice is looking through this window to see if they can determine more “records” problems as well as tacked on fees and just plain wrong balances in amounts owing and coming before the bankruptcy judges.

This is all interesting on a number of levels, especially if Justice will intercede and push Treasury to actually do its job on modifications as well.  Hope springs eternal.

It is also interesting because increasingly what we see in places like Phoenix is lawyers and legal wannabes peddling bankruptcy filings as the hammer trying to hit every nail in the last gasp to prevent or forestall foreclosures.   Often this is a case of burning down the barn once you find the gate closed.

Chapter 13 bankruptcy works but only when a homeowner has a “regular” income that can satisfy the judge sufficient to allow repayment over 5 years to get the citizen back on their feet.  This is not an easy standard and despite a bankruptcy judge overseeing the procedure and payments, because, as you remember, Congress last year refused to give such judges the power to amend the terms of the bankruptcy.

In places like Phoenix where despite the desert, most houses are “under water,” this means that a judge would be supervising payments at distorted interest rates on what are now atmospherically high home values.  Hardly anymore than desperate hail Mary pass, this is certainly not a solution for very many people.

But if it cracks the window to allow the Justice Department to stand up where the Treasury Department has done nothing but cave in to Wall Street and the bankers, this let’s give a special thanksgiving for that.