Faces of Foreclosure—Argy Tripodis
By Consumers Union on Monday, March 2nd, 2009
Recently, President Obama reiterated his support for giving homeowners some relief from rampant foreclosures by allowing bankruptcy judges to modify mortgages on bankruptcy filers’ primary residences. Meanwhile, the sentiments on both sides of the issue continue to heat up. Chip Parker, a Jacksonville Florida bankruptcy attorney says the opponents of bankruptcy reform are whiners.
In a Wall Street Journal article, Todd Zywicki, a law professor at George Mason University says giving bankruptcy courts the power to modify mortgages is a mistake. The details of such a plan are still being decided and are expected to be the subject of congressional action in the coming weeks. If you ask someone like Argy Tripodis, giving bankruptcy judges the power to modify mortgages on primary residences can’t come too soon.
Argy Tripodis, of Hobart, Indiana and her husband Yiannis, are the parents of three children and are just one of the many working families in the United States who could have benefited from bankruptcy judges having this power. Like many others, the Tripodis family was shocked to learn that while bankruptcy judges can modify all other types of personal debt, under current law, they cannot make any changes to a mortgage related to their principal residence.
The Tripodis family is struggling to hang on to their home and said that after a bankruptcy failed to keep the interest rate on their mortgage from going up, they had to refinance into another adjustable rate loan with increasing payments. The Tripodis family says it is stuck between a rock and a hard place. They cannot refinance their loan because they will have to pay a hefty prepayment penalty to their current lender if they refinance with a new loan and the declining value of their house now means that along with the prepayment penalty, they cannot refinance with a new loan that will be enough to pay off their existing loan. As the Tripodis family continues to pursue a loan modification with their lender, Consumers Union joins them in the hope that Congress will pass legislation giving bankruptcy judges the ability to rework mortgages in the bankruptcy process. Allowing bankruptcy judges to reduce the principal amount due or to modify a mortgage’s terms to make it more affordable is a prudent move to keep homeowners like the Tripodis family in their homes, paying their mortgages, rather than losing their homes to foreclosure.
The Tripodis family story is not unlike that of many others’. Argy Tripodis is 42 years old, works full-time and is the mother of three children. Her husband, Yiannis, also works full-time to support the family. In 2002, the Tripodis family purchased their home in a Hobart subdivision with the dream of spending many years there and investing their hard earned mortgage payments in growing the home’s equity. Mr. and Mrs. Tripodis purchased their home with an adjustable rate mortgage (ARM) which adjusted frequently and required increasingly more expensive mortgage payments. After the Tripodis’ youngest child was born two years ago, Mrs. Tripodis’ income declined because she was caring for her baby. When she returned to work, a significant portion of her paycheck went to pay for childcare for her youngest child.
In order to try to stabilize the escalating mortgage payments, Mr. and Mrs. Tripodis tried to refinance their mortgage but were unsuccessful. They then filed bankruptcy but were surprised to learn that the bankruptcy did not keep their mortgage payments from going up even though it even though their other debts were managed through the bankruptcy proceeding which was discharged in Bankruptcy Court in April 2007 after the Tripodises completed their Chapter 13 plan.
In November 2006 the Tripodises refinanced into another mortgage, but the payments are still unaffordable and consume over 40% of their take home income. They feel that they are caught in a bind. They cannot afford their payments, nor can they afford to sell because in the current real estate market their home value has declined. The Tripodises believe that refinancing would be the best way to get a lower mortgage payment they could afford so that they can stay in their home. But because they will have to pay an $11,000 prepayment penalty if they refinance their mortgage before November 21, 2009, refinancing may not be an option.
Mrs. Tripodis has been trying for a year to convince her lender to reduce or eliminate the prepayment penalty on their mortgage so that they can afford to refinance, but the lender has been unwilling to do so. In the hardship letter she sent to her lender, she told the lender that she and her husband are having difficulty making the monthly mortgage payments and meeting their other expenses, including medical bills, because her husband’s pay, which is based mostly on tips, has declined. She has complained to the Illinois Attorney General about the lender’s prepayment penalty policy but this has not had an impact.
Besides their paychecks, the Tripodises receive a limited amount of help from Mr. Tripodis’ mother and sometimes have to borrow money from other relatives. Even so, they are living paycheck to paycheck and often run out of food in between pay periods.
Reforming bankruptcy laws to give families like the Tripodises a chance, and eliminating prepayment penalties that make it hard for homeowners to refinance out of expensive mortgages, are two protections that are sorely needed. These changes will help reduce unnecessary foreclosures in the immediate future and eliminate one abusive lending practice that puts borrowers at risk of future foreclosure when they cannot refinance.
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