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Published on May 5, 2009
Bailout help for the nation's homeowners is not coming from Washington. The banks have made sure of that. But, there is a way that some bailout help can be provided by State legislators. The States no longer are allowed to regulate interest rates for mortgages and credit cards. The federal government has pre-empted the States as to regulation of usury. But the States do have the power to regulate foreclosures, and the States having no laws requiring judicial foreclosure should adopt judicial-foreclosure laws right away, and require all residential homeowner foreclosures to take place in court, where the homeowner can continue to use his/her house for perhaps two years without having to make any mortgage payments, and use the money to pay off credit cards and student loans. If this were to take place, the banks would probably make reasonable modification agreements available to homeowners in distress, which the federal government was not able to enact into law because of opposition by the banks and their lobbyists (who give U.S. Senators a significant part of their campaign funds). Also, legislatures in states such as NY and FL (judicial foreclosure states) should enact more requirements to ensure that homeowners do in fact get their day in court against the banks. Finally, all states should enact amendments to the state insolvency laws to permit the Courts to adjust mortgages and use some of the equity in the home to pay off other creditors of the homeowner.