Right now it can be done on a vacation home, recreational boat, etc., but not on a primary residence, but Senator Dick Durbin (D-IL) is bringing back a change in bankruptcy law to change this.
According to reports, this will be a priority of Obama, but we are hearing that about a lot of things right now.
This is a very good law for a number of reasons:
- Modifying mortgages is cheaper than foreclosure.
- With mortgages sliced and diced 6 ways from Sunday, it is currently impossible to get consent from the holders of the mortgages to renegotiate the loans.
- It punishes the players who created the bubble.
- The cost to people taking out mortgages is minuscule, on the order of 25-75 basis points (¼-¾%), which should not make a significant difference in home affordability.
- It makes the use of arcane financial instruments on home mortgages less certain, and hence less likely.
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