In 1933, the Minnesota Mortgage Moratorium Act was challenged by a bank which argued before the United States Supreme Court that it was a violation of the contract clause of the Constitution.
In Home Building & Loan Association v. Blaisdell, the court upheld the law imposing a mandatory mortgage modification.
[2] As of third quarter 2007, the percentage of sub-prime adjustable-rate mortgages (ARMs) that were seriously delinquent or in foreclosure reached 15.6 percent, more than double the level of a year ago (see Chart 2).
[3] The deterioration in credit performance began in the industrial Midwest, where economic conditions have been the weakest, but has now (2006–2007) spread to the former boom markets of Florida, California, and other coastal states.
The complexity of many mortgage-backed securitization structures has heightened the overall risk aversion of investors, resulting in what has become a broader illiquidity in global credit markets.
Legislators, regulators, bankers, mortgage servicers, and consumer groups have been debating the merits of strategies that may help preserve home ownership, minimize foreclosures, and restore some stability to local housing markets.
[5] On December 6, 2007, an industry-led plan was announced to help avert foreclosure for certain sub-prime homeowners who face unaffordable payments when their interest rates reset.
This plan provides for a streamlined process to extend the starter rates on sub-prime ARMs for at least five years in cases where borrowers remain current on their loans but cannot refinance or afford the higher payments after reset.
Working with the United States Treasury Department and other bank regulators, the FDIC will monitor loan modification levels and seek adjustments to the protocols if warranted.
[5] Mediation is usually a great way for a plaintiff and defendant to sit down with a neutral arbiter to hash out their differences and come to a resolution that is usually better than continued litigation.
In short, the RMFM was a complete waste of time, not because mediation is a bad idea but because of the limited loss mitigation options and because most state court judges could not or would not enforce the program.
However, while an LMM is pending, debtors will be required to pay 31% of their gross monthly income through the Chapter 13 plan as an “adequate protection” payment.
To accommodate the need for more flexibility among a larger number of servicers, the Streamlined Modification Program does differ from the IndyMac model in a few areas.
[11] The Streamlined Modification Program (SMP) was developed in collaboration with the FHFA, the Department of Treasury, Freddie Mac, and members of the HOPE NOW Alliance.
[13] With the George W. Bush administration refusing to enact FDIC Chairwoman Sheila Bair's controversial loan modification plan, lawmakers are taking matters into their own hands.
[14] "We (IndyMac Bank) commend FDIC Chairman Sheila Bair for her leadership in developing a systematic loan modification protocol.
[10] As history unfolds on the U.S. Housing and Finance crisis that caused the persistent recession, the (IndyMac Bank) bankruptcy and ensuing scandal are important to understand.
A dynamic interplay between social good, capital ownership and the rule of law is ongoing in the U.S. experiment with the democratic process.
In fact, the prevalence of their mortgages greatly fed the housing bubble with significant crossfunding and possible corruption to the government regulatory function through dramatic campaign funding contributions from these organizations.
Fannie Mae and Freddie Mac entered a new phase on December 9, 2008 for a fast-track program meant to make "hundreds of thousands of mortgages affordable to people who can't currently meet their monthly payments.
The changes in terms may include one or more of the following:[17] Fannie Mae's foreclosure prevention efforts have generally been made available to a borrower only after a delinquency occurs.
[26] The program was built as collaboration with banks, services, credit unions, the FHA, the VA, the USDA and the Federal Housing Finance Agency, to create standard loan modification guidelines for lenders to take into consideration when evaluating a borrower for a potential loan modification.
[28] The program abides by the following eligibility and verification criteria: Foreclosure rescue and mortgage modification scams are a growing problem.