Bankruptcy: returning the risk to lenders
![BKReform_Big[1]](http://firsttuesdayjournal.com/wp-content/uploads/BKReform_Big1.jpg)
loading...
loading...
This article reviews the 2005 bankruptcy reform, examines statistical evidence of the effects the reform had on mortgage default rates, and discusses the need for a repeal of bankruptcy reform to build a more stable mortgage and real estate market.
Lenders led the bankruptcy onslaught
High numbers of mortgage defaults were in the works even before the 2008 financial crisis began to show its effects on California’s real estate market. The Bankruptcy Abuse Prevention and Consumer Protection Act of October 2005 (bankruptcy reform) completed construction of the bars which would condemn so many homeowners to their current negative equity prisons.
Spun as a cure for the allegedly rampant fraud perpetrated by individual debtors (read: non-corporate America), the 2005 bankruptcy reform made it tougher for individuals to get out from under unsustainable debt and regain their financial footing. Riding high on the wave of lender dominance, the rentier class ushered in higher filing fees, more restrictive qualifying criteria and a curb on the judicial authority to grant cramdowns to negative equity homeowners seeking bankruptcy relief to keep their homes. With bankruptcy reform, mortgage lenders forced homeowners to bear the entirety of the risk of property devaluation — this after lenders had rubber-stamped approvals for the same bloated home values during the Millennium Boom. [For more information about the struggle between the debtors and the rentiers, see the September 2011 first tuesday article, Rentiers and debtors: why can’t they get along? ]
The rest of this content is only available to first tuesday Members. If you are a current first tuesday Member, please login above. To sign up, visit firsttuesday.us! is a licensed real estate agent and the first tuesday Journal Online editor. She is also lead editor for the Forming Real Estate Syndicates, Buying Homes in Foreclosure, Legal Aspects of Real Estate and Tax Benefits of Ownership books.End of free preview
Not a current Member? For only $29.50, our Annual Membership includes access to:
loading...
loading...About The Author
Giang Hoang-Burdette
Leave a Reply
RIGHT ON !!!
I am a 78 year old retired California attorney, with my practice having been focused on individual and small businesss bankruptycy. I retired just a few months after the bankruptcy “reform”.
Actually, the bankruptcy “rerform” ruined my practice and led to my exit from the profession of law.
My wife, who had been my paralegal, unexpectedly died just a few months before the bankruptcy “reform”, and the replacement paralegal that I hired bogged down under the burden of the more extensive filings that were required, getting me into trouble with bankruptcy trustees and clients, and exhausting the resources that I had remaining to continue my practice and serve my clients, which ultimately put me in a position in which I faced potential discipline by the State Bar, at which time, discouraged and despairing I just gave it all up.
Coincidentally, earlier today I posted a comment on MoveOn.Org very much to the same effect as your article, but with much less detail.
Keep up the good work.
I just subscribed to your email newslettter today, and I look forward to reading more about this subject and about other related subjects from your perspective of the defense of the 99% and of the beleagured homeowners of California.
Yours sincerely,
Bernard Edwin Galitz
loading...
This mess is a product of the politicians and the government. The politicians forced the lendors to lend to unqualified indiniduals who didn’t have a prayer of making the payments. Who wouldn’t “buy” a house with nothing down and no consequences for default….it beats renting and you can get a 1st quality place better than the rental. There were certainly enough real estate agent willing to get a commission.
Then enter the “flippers” to drive up the prices and they had no risk with nothing down.
A normal market needs to require “skin in the game” so that the buyers are more discerning and the lendors more stringent and the market orderly.
Now to Moveon.org funded by George Soros, a self proclaimed Nazi sympathizer whomade his billions by encouraging and pushing government policies that ended in currency defaults on the backs of the little people!!!!
loading...
This entire morasse of the housing markets is a perfect storm of Bankers and politicians lying in bed together for the greater profit of the corporations. It doesn’t take into it’s equation the parasitic nature of leverage visa vie borrower and it it ‘s doesn’t care. This is how a host is killed by such a parasite. Regardless of how the 99% attempt to solve this issue the banks will maintain to the very end their one and only one intent which is to keep principles the same, no write downs. In the end it will all end with a financial meltdown of our 99% and so will the great economy of this country. We need a revolution.
loading...
I agree with Joseph….the 99% has the numbers to over power the banks & politicians…our only road block is enough people have not become aware of that fact…..But it is happening slowly.
It is articles like this that help….Stay Informed.
loading...
One would think that FT would be focused on the facts of the meltdown versus buying Washington’s fairy tale that it’s all Wall Street’s fault. We know that the biggest culprits were Frank & Dodd’s abuse of power that forced the banks to hand out the lousy loans, the federal created oligopoly of the Big 3 rating agencies that stiffed Wall Street with phony ratings on those same loans, and Fannie and Freddie who reeked with incompetency and corruption (yet not a single criminal charge was brought and they are exempted from the new regs!!!).
It’s an embarrassment to the industry when one of its biggest voices continues to dispense the media’s Kool Aid.
loading...
This article is prescient, well researched, and well composed and written. I believe it’s the best FT article I’ve ever read.
Kudos to the author, Giang Hoang-Burdette. Keep up the good work!
loading...
Thank you for your good work, i am sure many people r thinking of your good help with this mess creeated by bankers and politiciens for enslaving all of us.
loading...