Most foreclosure victims aren’t folks who have flipped a thousand homes or made and lost millions in the real estate boom-turned-bust. Most homeowners who are now victims of foreclosure, depended on the goodwill of the mortgage industry to provide safe mortgages that would allow them to fulfill their dreams of homeownership. But instead of long-term homeownership many homeowners got subprime mortgages designed to explode in cost within a few years or toxic mortgages that were never affordable to begin with. “You can refinance next year, in two years, in five years…” the homeowners were told, only to be faced with a credit crunch that won’t budge and a mortgage payment that is now delinquent because they simply can’t afford to pay.
It is the responsibility of us all to make sure that these homeowners avoid foreclosure when possible and create situation where this foreclosure crisis can never happen again.
In the meantime, bankruptcy may be the most effective tool in helping homeowners facing foreclosure. Many consumer, civil rights, housing and labor organizations agree that mortgage modification in Chapter 13 bankruptcy is the most effective strategy for reducing the number of foreclosures. Even Credit Suisse agrees that allowing mortgage modifications in Chapter 13 bankruptcy would immediately slash foreclosures by 20 percent. But not just that, the fact that homeowners facing foreclosure might have the option of modifying their mortgage in Chapter 13 bankruptcy would offer an real incentive for mortgage companies to offer reasonable and affordable modifications.