Banks and other lenders have found a way to potentially make billions of dollars from the coronavirus-fueled upheaval in the U.S. mortgage market
The earnings would come from an unanticipated side-effect of Congress’ decision in March to allow homeowners affected by the pandemic to delay loan payments for as long as a year, combined with arcane regulations governing mortgage-backed securities.
The net result is that lenders would get the chance to buy tens of billions of dollars in mortgages out of bonds for less than their current market value — transactions that can hurt investors. Banks including Wells Fargo & Co. and U.S. Bancorp are already buying, frustrating bond holders who say the purchases are leading to losses. Lenders counter that the practice is hardly risk-free and has more to do with accounting issues than trying to score a quick profit.
Bankruptcy can help you avoid judgments and foreclosure
Falling behind with your monthly payments usually means that creditors will start to take steps to collect on your debt. In some cases, that could mean filing a lawsuit against you in an attempt to garnish your wages. Other times, if the debt has a connection to collateral, such as a vehicle, the lender may attempt to repossess that asset. If you have fallen behind with your house payments, that could even mean that your bank attempts to foreclose on your home.
Not only would a judgment or a foreclosure proceeding have a financial impact, but it will also create a negative mark on your credit for seven years. Bankruptcy can help you avoid both foreclosure and judgments, provided that you file in a timely manner. In other words, it could keep most of the negative marks off of your credit report.
Bankruptcy discharge freezes up your income for important costs
When you spend a large portion of your monthly income paying the minimum possible payment on debt, you will never overcome that debt. It will continue to increase over time and eat up more and more of your budget.
Filing for bankruptcy and discharging unsecured debt such as credit cards and medical debt can help ensure that you have enough money in your monthly budget to cover all of your most critical expenses, such as your mortgage and cost of living expenses.
Bankruptcy gives you an opportunity to learn from your mistakes
Without bankruptcy protection, you could wind up in a lifelong cycle of overextending yourself with credit and struggling to repay as much as you can. Bankruptcy helps break that cycle by eliminating unsecured debt and freeing up your assets.
If you take steps to rebuild your credit, such as the careful and conscientious use of a new line of credit, you may soon find that your credit score after bankruptcy is better than it was before you filed. Everybody’s financial circumstances are unique to their family. There’s no way to know how bankruptcy could affect you unless you sit down with a Richmond attorney who understands bankruptcy to talk about your options.
Give us a call today if you find yourself in trouble with your mortgage and the bank.