New Congress Looks To Add Mortgage Debt To Bankruptcies – BIG MISTAKE
So we have finally flushed most of the bad debt out of our system in 2008. The bad lenders are disappearing and lenders are feeling good about making new loans.
The only problem on the horizon is that Congress is back in session today.
Instead of looking at 2009 these fine folks can only see 2008. They are proposing adding mortgage debt to a bankruptcy judges jurisdiction.
Great, that is just what we need when lenders are opening up, a new set of laws they have to analyze and price into loans. Instead of finding their balance, banks are now going to have to worry about laws that will hurt them if a loan goes south. And banks are not in the business to get hurt.
So lending may not recover as quickly as if Congress had just stayed out of it.
The legislation would change allow bankruptcy judges to modify home loans in the same way that they currently may modify other unsettled obligations, such as credit card debt.
While the housing market downswing continues, some in the housing industry have warned that it is the wrong time to write long-lasting mortgage rules.
“Credit markets move like a pendulum so if you accept that there was too much credit a few years ago, there is probably too little credit now,” said Francis Creighton, the top lobbyist for the Mortgage Bankers Association. “Cram-down would lock the pendulum at an overly restrictive point.”
Foes of the cram-down plan argue that it would wrongly invalidate mortgage contracts and raise future costs of borrowing, but that opposition is beginning to wilt in the face of a worsening crisis. via Reuters.
Great points Tom - the flavor of the day solution is only adding to the instability and volatility.
When Washington ...
I see it all too often where owners decide to be investors without understanding that tenants have rights. Its ...
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please contact me via e-mail if interested in the home listed
above.
jonieckstrom@yahoo.com 
This is a topic currently being debated in our local Real Estate Board here in Toronto Canada. Online, we ...
A property management company should realize that most potential tenants now will have a foreclosure or bankruptcy on their credit....as ...
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Now is an excellent time for business people to buy if they have decent credit (I did not say excellent ...
I just finished emailing some guy from "West Africa" who gave me the same exact bs. He even went so ...
Comment by Jackson Hole Real Estate Broker Rick Armstrong on 6 January 2009:
It is possible that you are right. I do believe the solution is (what is happening now) allowing home mortgagees the ability to lower their monthly payment into a rate they can afford. This sounds like a more credit crunching tactic. By the way having been on the other side of someone going bankrupt and losing 60k with no recourse. I have one thing to say. People who don’t pay their bills should be required to payback all debt instead of hiding behind bankruptcy.
Comment by Ditech Home Loans on 8 January 2009:
It seems that this legislation would largely affect distressed loans currently in servicing portfolios rather than new home loans, since most lenders have returned to conservative underwriting guidelines.
Comment by JXL12 on 23 October 2009:
Moving on, we have the inspiring response of the police to the online publishing of one of the Mohammed cartoons by the British magazine, The Liberal. ,