J. Thomas Black Radio Interview: Change Bankruptcy Law

J. Thomas Black gave a radio interview on KTRH 740 AM today, with hosts Lana Hughes and J.P. Pritchard in support of proposed changes to the Bankruptcy Code that would allow Bankruptcy Judges to give relief to homeowners trapped in so-called “exploding ARM” mortgages.

Under the bill pending in Congress, homeowners with “subprime” or other nonconventional mortgages could file bankruptcy and ask a Bankruptcy Judge to basically refinance their mortgage, to give them an affordable interest rate, to reduce the amount of the loan that they had to pay back to the fair market value of the property (if it was less), and roll any missed or delinquent payments into the loan.

If passed, the law would “sunset” or go away after 7 years, hopefully after the credit crisis is past. The law would only be available to people who took out their loan after Jan. 2000, and before the enactment of the law. It would only apply to subprime or other nonconventional mortgages, and the homeowners would have to prove that they would otherwise lose the home, if not allowed to modify the loan.

It’s estimated that 2 million people could lose their homes to foreclosure over the next few years due to ARM loans and other shoddy mortgage lending practices. It is estimated that this new law could save 600,000 of these folks from losing their home. The Mortgage Banking industry is against the measure.