Even after being publicly disgraced, the banking lobby is powerful enough to stop a common sense reform like this? -raghu.
http://www.bloomberg.com/apps/news?pid=20601039&sid=aFmdO54IrGSk -----------------------------------------------snip Buy a Beach House for Shelter When Going Bankrupt: Ann Woolner Commentary by Ann Woolner Oct. 17 (Bloomberg) -- Say an absentee landlord owns the house next to yours. Neither of you keep up your mortgage payments. If you both declare bankruptcy, chances are better that he would keep his place than you yours. However beloved your home or settled your family is in the neighborhood, you can't force your mortgage holder to change its terms to escape foreclosure. The landlord can. Bankruptcy law favors the landlord over the homeowner when it comes to modifying mortgages. It's easier to hold onto a second home at the beach -- and a boat to go with it -- than your home sweet home. Backward? Absolutely. A speculator with slum properties all over the city, who owns a place in Manhattan and a house at the Hamptons, gets better treatment under bankruptcy law than a salaried worker's family with only one, modest bungalow. ``Current law permits modification of any type of debt in bankruptcy except for a single-family principal residence,'' says Adam Levitin, who teaches law at Georgetown University. ``You can modify credit-card debt. You can modify student loans. You can modify debt on a yacht,'' points out Levitin. The one item that bankruptcy can't force a creditor to alter is the loan on the roof over your head. And yet, that's the debt most deserving of modification to help the economy recover and to offer some sense of stability to the debtor. [...] Industry Opposition The opposition stems from the mortgage industry, which says if lenders never know whether the original terms of the loan could be changed by a bankruptcy judge, interest rates on primary homes would soar by 1.5 percentage points. ``That's just laughable on its face,'' Levitin says. He says interest rates on loans for investment property tend to be only 0.38 percentage points higher than for primary homes mainly because of the extra risk that the borrower won't repay. It will take a law to undo the restrictions imposed on home mortgages by the 1978 bankruptcy code. ``The sad thing is we've been pushing for this for about a year and a half, two years,'' says Henry Sommer, president of the National Association of Consumer Bankruptcy Attorneys. ``It probably could have somewhat ameliorated the crisis we are facing now,'' says Sommer, who practices in Philadelphia. -raghu. -- Confucius say, dirty book rarely dusty. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
