Posted on 04/27/2009 9:04:21 PM PDT by TigerLikesRooster
Mortgage "cramdown" laws needed: Warren
Mon Apr 27, 2009 7:20pm EDT
WASHINGTON (Reuters) - The head of a U.S. financial bailout watchdog panel said bankruptcy judges must be allowed to reduce home mortgage debt or the Obama administration's housing rescue efforts could fail in the areas where they are most needed.
Elizabeth Warren, who chairs the Congressional Oversight Panel for the Troubled Asset Relief Program, told the Reuters Global Financial Regulation Summit in Washington on Monday that her biggest concern about the housing plan was the "failure to deal with underwater mortgages".
The Obama administration's refinancing aid so far will not help much in hard-hit housing markets where home prices have fallen 30 to 50 percent below their mortgage principal, she said. So-called "cramdown" changes to bankruptcy laws or other legal devices were needed to cut mortgage debt to underlying home values.
(Excerpt) Read more at reuters.com ...
So if you take on too much debt, and have to declare bankruptcy, you can reduce your mortgage. Well if that’s the case:
http://www.youtube.com/watch?v=-57_iNzp0Ck
Catch 22.
The banks will not loan money to even qualified borrowers if they fear the government is going to step in and rewrite the contracts at some point in the future. In addition by forcing these loans to lower debt amounts the banks/lenders are taking all the losses which will only increase the number that fail and will have to be bailed out or simply let go bankrupt. And the bottom line is that borrowers are at least as responsible as the banks and should share in the losses instead of being bailed out.
So many unintended consequences. There are not enough bankruptcy judges for the flood of mortgage cramdowns that would result.
Good observation. However, the rats can just create special cramdown courts to deal with flood of cases. Many unemployed lawyers would gladly serve as cramdown judges. In inner city areas, community activists could serve as cramdown judges to stick it to the man. Cramdown is an excellent tool to achieve social justice.
Cramdowns are the road to chaos in the mortgage market. The future implications are difficult to comprehend. Perhaps there would be a race to bottom so that the property is given to the current occupant without any debt obligation. The situation seems similar to rent control in which the occupant acquires rights to subsidized rents for perpetuity. The occupant rather than the owner can capture the profit from increased rents.
Cramdowns are a large nail in the coffin of property rights. The rats are working so fast to destroy property rights that ownership will become a burden without any profit potential.
Unless the bank’s actions have been tantamount to fraud, there should be no cramdown court actions.
With Obama, SCOTUS and local governments, any property rights we might think we have left are, in reality, just illusions.
Quiz: What kind of nation do you have when you change from a nation of laws and contracts, to a “cuz I says so” nation (i.e. govt ordered contact breaking)?
Answer: A tyranny.
It still amazes me that the mega-banks are reporting profits. I haven’t seen one of those dark-suited rascals do a deal in months. This whole profit nonsense is just a press release and will most likely not meet the smell test of performance.
Didn’t the fed change the accounting rules?
Just more smoke and mirrors.
Accounting scams. They booked the TARP money as income rather than as a loan, etc.
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