Terrific news just in: the House of Representatives has just passed the Helping Families Save their Homes Act of 2009 which provides for, among other things, Bankruptcy Judges to have the power to modify mortgages in bankruptcy. Currently, bankruptcy judges have that power with respect to almost all other loans, whether they be for cars or yachts, or residential properties other than a primary residence. This is a great tool for homeowners. The threat of bankruptcy will do more to persuade lenders to modify mortgages than any other government program could. This is not going to deprive banks of their property interests in the collateral; they will retain the secured interest, but may be deprived of the unsecured portion of the loan if the house is underwater (i.e., treated like other unsecured creditors), and may be required to accept modified repayment terms. However, it may allow avoidance of second and third mortgages that are effectively unsecured by the declining house value. It should.
Even better news! Just before this vote, the House took a vote to congratulate the USC Trojans on winning the Rose Bowl. A few brave souls (15) voted no and 4 voted "present." http://clerk.house.gov/evs/2009/roll106.xml I suspect, therefore, that there are 19 Bruins in the house. We few, we happy few, we band of Bruins...
Thursday, March 05, 2009
Cramdown Legislation Clears the House
Posted by The Law Talking Guy at 4:18 PM
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U....C....L....A.....U! C! L! A! FIGHT! FIGHT! FIGHT!
It has not been reported adequately in the press that this "cramdown" merely puts mortgage lenders back on the same footing as other lenders. When rich folks can write off their corporate debts, yachts and private planes and second homes--but the middle class cannot get any relief on what is surely their biggest loan!--it makes a mockery of the protection that bankruptcy was meant to provide ordinary Americans.
While the biggest corporations are using "Chapter 11" to avoid all responsibility, while their executives exit with million-dollar bonuses, it is beyond insulting to hear Republicans fret that somehow ordinary Americans will take advantage of this measure and stampede toward bankruptcy. Unlike the Republicans, most ordinary Americans still have a sense of shame.
It is tragic that the media never ever report that this is is not the creation of an exception, but the ending of one.
Speaking of things that middle class America can't avoid with bankrupcy: student loans.
Having the top tier of your society held back and down by student loans doesn't help the economy either.
Student loans are nondischargeable for a good reason: they are sometimes mortgage-sized and backed by no collateral or proof of income on the part of the student. Money is lent to peopel who are patently unable to repay at the time they take out the loan. For that reason, the price would be sky-high if they were dischargeable in bankruptcy.
As it is, there is no real cost to default other than to one's credit rating. The government cannot foreclose on your education.
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