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Questions, answers on bankruptcy mortgage rewrites

With foreclosures continuing at a rapid pace, the House has passed a measure to let debt-strapped homeowners seek reduced monthly mortgage payments by filing for bankruptcy. The legislation, passed Thursday, is not yet final and more changes may be made. Some questions and answers about the bill:

Q. Who is eligible?

A. Any homeowner who can show he can't afford his mortgage and can prove he has sought new terms from the company holding the mortgage. Congressional budget analysts have estimated that it could help 350,000 families over the next 10 years. Senators are discussing limiting the legislation still further, to only certain types or sizes of loans.

Q. What would a borrower have to do before filing for bankruptcy?

A. The borrower would have to call the mortgage holder - known as the loan servicer - seeking a change in terms, and provide his financial information including income, expenses and debts.

Q. How long would it take?

A. The homeowner would have to wait 30 days to give the mortgage company time to offer new loan terms. Then he could file for bankruptcy under Chapter 13.

Q. If the mortgage company offered a workout, can a homeowner still seek one under Chapter 13?

A. Yes, but the judge could consider whether the loan servicer already offered a reasonable rewrite. The bill defines that as a deal that would bring the homeowner's monthly payment down to about one-third of his gross income.

Q. Can't bankruptcy judges already change the terms of home mortgages?

A. No. Under current law, bankruptcy judges can restructure any type of loan - including for cars, college and vacation property. They cannot now restructure mortgages on primary residences.

Q. What if you lied on your mortgage application?

A. The measure doesn't bar people who got their loans in the past without submitting complete or accurate financial documentation. However, the homeowner would be required to give the bankruptcy court a good-faith plan, including proper documentation, for repaying his debts.

Q. What if the homeowner sells his home soon after declaring bankruptcy?

A. The lender would get a substantial cut of the proceeds from a sale of the home if the homeowner sold soon after finalizing his bankruptcy plan. The mortgage company would get 90 percent for a sale within one year, 70 percent after the second year, and half after three years. The amount falls over time to 10 percent in the fifth year.

Q. Does the bill help people who aren't bankrupt but are having a hard time making their mortgage payments?

A. No. The bill offers no direct help to people who can afford their monthly mortgage payments. Proponents believe it will help all homeowners by prodding lenders to negotiate with borrowers rather than let a bankruptcy judge rewrite the terms. Critics argue that it will hurt homeowners and would-be homeowners by prompting mortgage companies to raise interest rates to cover losses they might suffer if their loans are subject to judicial changes.

The House bill is HR 1106.

The USPS Still Matters

The USPS Still Matters

You may have heard that the United States Postal Service is in dire financial straits, having lost $2.8 billion in 2008 and on track to lose twice that much this year. Things are so bad that the Postmaster General recently asked Congress for permission to curtail mail delivery six-days a week.

This matters because the USPS continues to provide a vital public service. The Post Office not only reliably delivers political periodicals like The Nation -- a class of content vital to a functioning democracy -- to anyone anywhere in the country, but the mails still serve to bind our vast populace together, with many post offices serving as de facto community centers.

In this time of fiscal crisis, there is thankfully an easy way to support the USPS in the form of House Resolution 22. This arcane but very important legislation in the House, carrying 76 co-sponsors, calls for a change in the accounting treatment of retiree health benefits for USPS workers - a change that would not affect employee benefits, or raise government costs, but would make it far easier for the USPS to balance its books, as required by law, without drastic service cuts or layoffs.

An obscure legal requirement currently forces the Postal Service to prefund 80 percent of its future retiree health benefit costs by 2016, costing the agency at least $5.5 billion a year on top of the $2 to $3 billion per year it annually pays. No other enterprise in the country - public or private - is required to prefund such costs at all, much less on such an onerous payment schedule.

H.R. 22 would save the Postal Service an average of $3.5 billion per year over the next eight years, and, as under current law, any remaining liability in 2016 would be amortized over 40 years. This bill cannot solve all the Postal Service's problems, but without it, the continued viability of the Postal Service is in serious jeopardy - which is why the major postal workers unions, the APWU and the NALC, both support the legislation. (Legislative consultant Robert Brinkman goes into more detail as to the importance of refinancing retiree health benefits at postmasters.org.)

The mail, to me, should be thought of like the highways. They shouldn't need to make a profit or even break even -- they're legitimate functions of government which should, if necessary, be subsidized. Yes, the rise of digital media has reduced the importance of the mails in circulating political opinion. But it hasn't eliminated its historic role particularly at a time when only fifty-five percent of all Americans currently have access to high-speed internet connections.

The Postal System remains a critical and fundamental part of the nation's communications and commerce infrastructure, and providing timely delivery at affordable rates is still essential to the nation. Please voice your support by asking your elected reps to support HR 22.