It appears that President Obama’s idea that federal bankruptcy judges will be given the authority to modify mortgages is picking up steam. Actually, judges already have such authority to modify mortgages balances, including modifying the principal balance… but only in commercial bankruptcies. Thus, while it may take a few more months, it is now a likely scenario that if you are in bad financial shape, and your house is worth less than the mortgage that Banks will know that they will be forced to modify your loan. Simply put, they know you could file for bankruptcy or in the alternative they will begin to negotiate true modifications where the banks will be forced to take into account the true value of the home. If the home value is less than the mortgage, the Banks will have no choice but to negotiate based on the realities of the market place. So stay tuned. It will only get more interesting!