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CLIENT ADVISORY - December 13, 2007

Sub-Prime Mortgage Bankruptcy Bill Advances

by Beth Ann Schenz, Esq.

In an effort to relieve homeowners from the mounting pressure of foreclosure, the House Judiciary Committee passed a substitute version of the "Emergency Homeownership and Mortgage Equity Protection Act of 2007" (H.R. 3609) in a 17 to 15 vote yesterday.

While this action of the Committee further advances the proposed legislation, the bill will not go the full House until the first of the new year – at least for now.  This current version of the bill will escalate bankruptcy filings as the bill's major provisions provide substantial incentives for homeowners to file chapter 13 bankruptcy plans.

Such key components of the bill allow certain, qualified debtors to do the following:

    - "Cramdown" their loan obligation to the value of their real property
    - Reduce mortgage interest rates and avoid prepayment penalties
    - Prevent certain fees and charges to be added to their loan obligations
    - Forego credit counseling before filing for bankruptcy relief

The bill targets debtors who have existing non-traditional and sub-prime mortgages originating after January 1, 2000 and who do not have sufficient income after payment of certain expenses to stay current on their mortgages and cure arrears.

While politicians supporting the bill are attempting to protect hundreds of thousands of families from losing their homes and cure the instability in the housing market and the economy, the ramifications of the bill on future lending still remain unclear.

Weltman, Weinberg & Reis Co., L.P.A. will continue to keep you updated with the progress of the proposed legislation. 

If you have any questions on this information, please contact Ms. Beth Anne Schenz, Esq. 

Beth is an associate in the Bankruptcy department of the Brooklyn Heights office of Weltman, Weinberg & Reis Co., L.P.A.  Beth can be reached at (216) 739-5645 or via e-mail at bschenz@weltman.com.

Client Advisory is published by Weltman, Weinberg & Reis Co., L.P.A., an organization providing comprehensive creditor representation.  The information contained in this advisory is a summary of legal information and is not intended to constitute legal advice on specific matters or create an attorney-client relationship.  Contact any of our offices or visit our website at www.realestatedefaultgroup.com for more information, company facts and attorney profiles. (c)2007