Letter: Editorial wrong about bankruptcies

The editorial "Some hurt to go with the help" (Saturday) was off the mark.

Foreclosures are destroying Ohio neighborhoods. More than 300,000 Ohio homes are at risk of foreclosure. Congress is considering a law that will save many of these homes at no cost to taxpayers. The law would allow bankruptcy judges to modify residential home loans. Residential mortgages are the only loans that cannot be modified in bankruptcy court.  

The mortgage industry is against this legislation, but its arguments are empty. They talk about the sanctity of contracts. Yet these same lenders have no compunctions about modifying their own contracts in bankruptcy when they are in trouble.

They claim judicial modification would cause mortgage rates to go up. That argument is absurd. The bills only apply to existing mortgages, so there will be no risk of modification of future loans.

They claim this remedy is unfair to those who are current on their mortgage payments and bought homes they could afford. To the contrary, it will prevent more vacant homes, which will keep home values up, and reduce the billions of taxpayer bailout dollars going to the mortgage industry.

The Lima News claims judicial modification would "probably prevent few foreclosures" because "most Chapter 13 bankruptcy applications are denied." Few applications are denied. Many cases are dismissed in the years after plan approval, but a major reason is people cannot afford to pay both their high mortgage installments and fund the repayment plan. Judicial modification would reduce mortgage payments and keep them stable. One of the key reasons for passing this legislation is to make Chapter 13 more effective in saving homes.

Richard H. Nemeth is state chairman for the Northern District of Ohio, National Association of Consumer Bankruptcy Attorneys.