Bankrutpcy Law causes increased mortgage foreclosures

[Glenda]

There may be a more recent article than this. But one of the unintended consequences of the Bankruptcy law of 2005, caused people to pay off credit cards first, and lose their homes.

http://www.boston.com/business/personalfinance/articles/2007/11/11/shift_in_bankruptcy_laws_staggers_mortgage_holders/?rss_id=Boston+Globe+--+Business+News

Shift in bankruptcy laws staggers mortgage holders
New rules prompt debtors to pay off credit cards first

Bloomberg News / November 11, 2007

Washington Mutual Inc. got what it wanted in 2005: a revised bankruptcy code that no longer lets people walk away from credit card bills.

The largest US savings and loan didn't count on a housing recession. The new bankruptcy laws are helping drive foreclosures to a record as homeowners default on mortgages and struggle to pay credit card debts that might have been wiped out under the old code, said Jay Westbrook, a professor of business law at the University of Texas Law School in Austin and a former adviser to the International Monetary Fund and the World Bank.

"Be careful what you wish for," Westbrook said. "They wanted to make sure that people kept paying their credit cards, and what they're getting is more foreclosures."

Washington Mutual, Bank of America Corp., JPMorgan Chase & Co., and Citigroup Inc. spent $25 million in 2004 and 2005 lobbying for a legislative agenda that included changes in bankruptcy laws to protect credit card profits, according to the Center for Responsive Politics, a nonpartisan Washington group that tracks political donations.

The banks are still paying for that decision. The surge in foreclosures has cut the value of securities backed by mortgages and led to more than $40 billion of writedowns for US financial institutions. It also reached to the top echelons of the financial services industry.


...

"We have people walking away from homes because they can't afford them even post bankruptcy," said Sommer, a Philadelphia-based bankruptcy attorney. "Their mortgage rates are resetting at levels that are completely unaffordable, and there's nothing the bankruptcy process can do for them as it now stands."

Slightly related to my earlier post:
http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x2736510

[SpiralHawk]

1. "Karma is a bitch." - republicon corporate greedheads

[WolverineDG]

2. Killed the goose that layed the golden eggs

Someone didn't listen to their Mother Goose stories....

dg

[FormerDittoHead]

3. My congressman R. Andrews wrote me that it would bring down interest rates - AND IT HAS!

Wow - just yesterday 3/4 of a point! Of course, that was in reaction to a total panic on the stock market but the rates DID go down!

Way to go, Rob Andrews!

:sarcasm:

[InkAddict]

4. Many more cannot now/will not be able to afford

home maintenance. Priced a roof lately - a new furnance/AC??? A new sump? Hot-water tank? Why, you'll need the same as a class to a semester of college tuition up-front and pronto. Have a lawn service? Third vehicle an aging riding mower??? Lawns are full of weeds, and paint is peeling. Price outsourced-made kitchen appliances - quality's not even there, so it's tough to buy anything lasting without a credit card or a well-appointed portfolio; note to self: budget for replacement in five years at cost+inflation. Disposable income's sucked up fuel tanks--so, you'd really like to paint the walls, re-floor/carpet. Those ticky-tacky housing developments, with those creative steep-pitched multi-level rooftops, are aging out; proud un-updated WWII-to-century homes, a maintenance nightmare money pit.