December 22nd, 2009 by Reed Allmand 
Shhh! Mortgage bankers don’t want you to file bankruptcy. They don’t want you to file bankruptcy and they definitely don’t want you to have the power to modify a toxic mortgage in bankruptcy. In a letter from The Mortgage Bankers Association to Congressional leaders, mortgage bankers expressed their outright opposition to a mortgage bankruptcy “cram-down” amendment in the Wall Street Reform and Consumer Protection Act that would give homeowners the power they need to modify toxic mortgages in bankruptcy.
It shouldn’t surprise the average American homeowner, especially those facing foreclosure, that the letter from the mortgage bankers opened with a blatantly false statement:
Our primary goal should be to help keep more families in their homes and to unfreeze the credit markets. Cram down legislation fails on both marks. It will encourage more homeowners to opt for bankruptcy, and it will inject new risk into the mortgage market, thus making it more difficult for borrowers to buy, sell, or refinance a home.
Encourage homeowners to file bankruptcy? Let’s get real; there are now more bankruptcy filings than during the period immediately bpost-2005 bankruptcy reform. Well over a million bankruptcy filings! And that’s without the ability to modify toxic mortgages in bankruptcy. Homeowners facing foreclosure are already filing bankruptcy in droves because mortgage lenders have failed to keep up their end of the bargain by failing to permanently modify the toxic mortgages they sold Americans. Furthermore, the only people who have injected risk into the mortgage market are careless bankers who have made a killing off toxic mortgages packaged for both homeowners and investors.
The mortgage bankers continue with more misinformation:
The Conyers amendment also directly undermines the Obama administration’s Home Affordable Modification Program (HAMP). While HAMP is still getting up to full speed, it has already exceeded the President’s goal of securing 500,000 trial modifications by November 1, 2009. We clearly need to work to refine and improve this program to increase the rate of permanent modifications, but we should not raise potential new problems for HAMP by layering the possibility of cram down on top of it.
Once again, the only people undermining the Making Home Affordable program are mortgage lenders and servicers who have consistently and blatantly ignored homeowners’ pleas for help. Foreclosures are devastating millions of American families while mortgage lenders fail to even process the paperwork of many homeowners attempting to access the Making Home Affordable program. Not only that, most of the homeowners in the “temporary” modification programs have not graduated to permanent modifications which was the whole point of the program. Less than 4 percent of homeowners in the trial modification program have received permanent modifications as of this writing. We cannot stop this foreclosure with half measures, we need to give homeowners the leverage they need to fight foreclosure. If we do not allow judges to modify toxic mortgages in bankruptcy, we are only kidding ourselves about our willingness to stop this foreclosure crisis.
About Reed Allmand
Allmand's vision is rooted in his own financially precarious childhood in Abilene "My father always had difficulty holding a job and supporting our family, so after my parents divorced when I was 12, my sister and I got jobs to help make ends meet," he recalls. "I remember what it felt like as a child to worry that our car would be repossessed or home foreclosed on."
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