ArnoldCountry

Solving the Housing Crisis in Bankruptcy Court

Interesting piece but contains a ton of fear and speculation based on non-fact. Giving the courts that type of power will solve the problem pretty fast. Right now, servicers cannot modify loans because their pooling and servicing agreements have huge limitations and if they go outside of those limitations, they are required to buy back the loans from the pool. However, if they can show the consumer threatened bankruptcy and their modification gave them the same result but at lower cost (no legal fees in bankruptcy), the investor pool would have a tough time getting them to buy back the loans.

I think the judges getting the authority will provide just the incentive lenders need to properly modify loans. It will have the effect of curtailing foreclosures, reducing the inventory of homes, and getting this housing mess back onto the road of recovery.

Will there be some big losses, you bet, but they already took place, on paper. Rates will not go through the roof, instead, they will provide stable loan products with qualifying borrowers who will give stability to a marketplace that has performed extremely well for decades instead of hybrid products and liar loans which tanked the market in just a few short years.

This does not even require a taxpayer bailout, it passes on the loss to where it belongs, the lender who controlled the gold and the rules. Yes, borrowers are wrong too but none of those loans would have ever been available unless the rules had been changed, which the borrower had no control over the rules.

As republican as I am... this democrat proposal for once is actually right on the money.