J Thomas Black
Board Certified, Consumer Bankruptcy Law- Texas Board of Legal Specialization

The number of U.S. households facing foreclosure in January increased 15 percent from the same month last year, and a surge in cash-strapped homeowners who've fallen behind on mortgages could be on the way, the Associated Press reported recently.  With high unemployment, it should not come as a surprise.

Many of my clients in the Houston area are trying to get their "adjustable rate" or ARM mortgages modified, with little success. The consumer bankruptcy bar through a national organization name NACBA, tried to get Congress to approve changes in the bankruptcy laws that would let bankruptcy judges modify the loans of Chapter 13 debtors, but that effort failed twice.

The mortgage industry just has too much "swing" in Congress, in my opinion. We have had success lately in "stripping off" second mortgages, but that is only effective if there is absolutely no equity to support the second mortgage, and the homeowner has to file Chapter 13 bankruptcy to do so, of course. I'm not sure where this is all going to lead, but it can't be good.

When the $8000 tax incentive for homebuyers ends, and interest rates start creeping up, there had better be an end to the recession soon, or there will likely be big trouble on the homeownership front in this country. By filing Chapter 13 for homeowners in trouble, I can deal with what they are behind, the arrears, but they must be employed or have regular income coming in. And I cannot force the mortgage company to do a loan modification. Unfortunately I have an increasing number of prospective clients who are ready to just walk away from their house; they realize that there is no equity and that they just can't afford it.

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