Twelve percent is the number of American homeowners who are facing foreclosure right this minute.  Now, though, the House has approved a plan that would allow options for lowering payments and/or interest rates through bankruptcy.  It now must survive a tough beating from the Senate.  Not surprising, voting fell along party lines with the vast majority of Republicans vehemently opposing this bill. 

Bankruptcy courts have long since had the authority to modify loan terms for automobiles and even student loans.  It’s now this much closer to being able to modify home mortgages, including interest rate changes without the approval of banks or mortgage companies.  Many say this will be a great incentive for these same banks and mortgage companies to negotiate with homeowners before their loans are flagged for foreclosure. 

Still, there are those who are convinced this will overwhelm bankruptcy courts by hopeless homeowners who have no more options.  Further, it’s been suggested this will ultimately raise interest rates for new home purchases as a way to offset the forced lowering of interest rates by the courts. 

Another interesting facet of this proposal allows bankruptcy judges to determine if homeowners were victims of aggressive and perhaps illegal mortgage companies’ tactics.  It’s believed the bill itself will have many subprime mortgage companies scrambling to extend modified agreements with current homeowners to avoid the scrutiny of a bankruptcy court. 

Of course, there are always those peculiar happenings that leave us wondering about the motives of some of the politicians who sponsor or support these bills.  CitiGroup has already made a deal with a group of Democrats that will allow it to bypass some of the rules, should this be passed into law.  CitiGroup has agreed to begin enacting this yet-to-be-passed law with some restrictions and far less input from bankruptcy judges.  Another motive of some politicians includes inclusion of only subprime mortgage companies, which means the bigger lenders such as Wells Fargo, CitiGroup and even Wachovia will be exempt from the law altogether.

Ah, but then there’s yet another angle.  The scrutiny this bill will set into motion, should it be passed into law, will include repercussions for those who knowingly lied on their mortgage applications.  Many, during the height of the subprime golden days, were allowed to “state” their income with absolutely no verification by employers; the same rules applied to their bank balances as well.  With no verification from their banks, potential homeowners “stated” their bank balances.  With 100% financing offered the vast majority of the time, most subprime loans required no down-payments either. 

Clearly this bill has the potential to uncover a lot of less than honest deals.  The Senate is expected to vote in the coming months.

As if the mortgage downfall and uncertainty of what the future brings weren’t enough, all the months of market fluctuations, the endless debates within the House and Senate and each day bringing a new

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downfall of some financial institution have culminated into a ninety year old woman attempting to kill herself because of the overwhelming burden foreclosure proceedings brought. Fortunately, she wasn’t successful. Still though, for anyone who wondered how bad things would get for the everyday American, this should be a clear indicator of the crisis.

Police had attempted to serve the foreclosure notice to her over thirty times! What makes this even sadder is she had lived in this home for the past 38 years. My guess is she probably raised her children in this house; the walls surely hold a lifetime of joys, accomplishments and dreams.

It was reported that in her efforts to refinance her home at some point resulted in having to do so through a sub-prime mortgage lender - most likely her age being a factor. The stress must have been overwhelming for her to believe the only out - the only way to remove the fear and stress - was to take her own life. Recognizing the lender’s right to protect its investment, you would think there would have been a far more satisfactory solution. Therein lies the heart of the problem - the vicious cycle of lenders not being able to collect mortgage payments because homeowners can’t make those mortgage payments because the economy is close to hitting rock bottom because the lenders can’t collect mortgage payments…..and so it goes until a rod is slammed into the spokes resulting in an unsuccessful suicide attempt by an elderly woman.

Unfortunately, sometimes acknowledging the problem isn’t always the first step towards solving the problem. There is certainly no visible solution in this situation. I guess they finally got her evicted, though. Meanwhile, the rod is kicked out of the spokes and the wheels start turning again, complete with the cycle that has no end in sight. If the recently passed rescue bill were to kick in this very minute, it’s too late for so many who have avoided being served foreclosure notices in hopes of a miracle or windfall of money. Since no one even really understands how this rescue bill will help anyone other than the big dogs on Wall Street, it’s likely there will be many more like this woman. Most won’t consider suicide as their only way out, but their lives are surely to drastically change and because of that, they could care less about the economy’s impact on the mortgage industry since they are no longer homeowners with anything at stake.