Zuckerberg Bankruptcy Law Office

I was encouraged - but just a little - by reading a report a week ago in the Indianapolis Star
about the federal program to prevent foreclosures and the progress that's been made.  As you know, in recent months I've been blogging about the problems homeowners are having with the process, and about the terrible service and the overwhelmed employees at the mortgage servicing companies.  I've talked about the money these companies have been given by the government to help modify mortgages and keep homeowners in their homes, and about the fact that the system is just not working smoothly at all.

Since I, along with the other professionals in my four bankruptcy law offices around the state, have been working hard to help homeowners communicate with their lenders and negotiate modifications on their mortgages, I was glad to read that more than 500,000 mortgages have been modified nationwide under HAMP (Home Affordable Modification Program).

Here in Indiana, the Star reported, JPMorgan Chase is the top HAMP user.  In fact, Chase has hired 4,000 new loan counselors just this year to help homeowners.  An Indiana law that went into effect in August mandates the right of any homeowner to have a settlement conference with the lender before a foreclosure can happen.  The Indiana Housing and Community Development Authority runs the Indiana Foreclosure Prevention Network.

One problem that has arisen in our state, though, is that the lender must always be represented by legal counsel at those settlement meetings, but the homeowner rarely is.  Nonprofit consumer counseling services such as Momentive, are afraid representing clients at settlement meetings will be seen as giving legal advice (something nonprofits are not allowed to do). Our state then set up a program to train trial lawyers in foreclosure prevention, but only a few of them have signed on.

As I said earlier, I'm a little encouraged by the government initiatives, but I'm more than a little discouraged, too. Debate in Congress about allowing bankruptcy courts to get directly involved in "mortgage cramdowns" keeps stalling. Marion Superior Court Judge Cynthia Ayers sums it up: "There are a lot of issues with the new state law.  The main problem I see with it is we don't have lawyers and facilitators to represent homeowners in the settlement conferences."