I have a problem with Edwards' economic policy.

"As president, Edwards will let homeowners shed excessive mortgage debt in bankruptcy. They will be able to keep their homes by paying off their full market values and get new loans terms set by the courts. For example, a family owing $120,000 on a home worth $100,000 could cut its mortgage to $100,000, with the remaining $20,000 treated like other unsecured debt in bankruptcy. The relief would be available only once and at the discretion of the bankruptcy judge."

http://johnedwards.com/issues/predatory-mortgages/

I'm sorry, but this is just unacceptable to me. People must be responsible for their own financial decisions. If they foreclose and can't afford a less expensive house, then they can rent. There is no reason people need to own houses unless they can afford them, and there is no reason for the government to subsidize home ownership.

It's bad economic policy. Although I could afford a house, I've chosen to rent because I see no advantage to home ownership. As a taxpayer, I should not be held responsible for people who got in over their heads.

real good deal for corps

I don't get that one at all. How are FHA loans and HUD loans bad policy?

You seemed to be saying that you don't support it all that much to begin with, but are really really opposed to this. In any event, do you oppose homeownership in general?

It's like owning anything else. People should only buy what they can afford.

After all, SOMEONE owns that home you are renting.

I don't necessarily agree that the taxpayers should bail out people who took bad loans, but I have a lot of friends in the mortgage business and there was a lot predatory lending and even fraud going on. This is not to say that people aren't responsible for reading any contract they sign, but a lot of people got bamboozled by these bad lenders.

Depends on the circumstances. There are other things to invest in besides property, and renting is less expensive than paying a mortgage. Also, it depends how long a person intends to stay in the same place. Saying buying a home is "smart" for whoever can afford it is a myth perpetuated by the housing industry.

This point of view is clearly articulated here:

Renting Makes More Financial Sense Than Homeownership
http://www.smartmoney.com/home/living/index.cfm?story=rent

the subprime mortgage movement in the first place.
'back in the day" banks made 30-yr fixed mortgages with 20% down
I couldn't buy a house until I could handle that

But like everything else in this post-Reagan world of derivatives and derivatives of derivatives, the pyramid scheme of not only making these loans but marketing them aggressively drew in a lot of people who admittedly didn't read the fine print. At the end of the day as they get foreclosed and go bankrupt, the wheeler-dealers keep making millions. It would be nice to have a "reset" button and not get that many naive people into such a mess, but they are there. I am not in favor of blanket forgiveness of stupidity, but there are a lot of cases of victimization. the woman who ahd been living within her means in her own home for 23 years and went looking for a way to pay for some repairs - the mortgage broker convinced her to go for an ARM that now has her about to lose the house. She should have known better, sure. But I view that mortgage broker as equivalent to the people who sell driveway sealing, apply black paint, and vanish. Only worse.

Having encouraged predatory practices and supported them by lack of regulation of the extremely complex world of finance, the country has created yet more victims of big business. Setting that right is not simple.

When they got their mortgages, they had good paying jobs and could afford the payment. That's what is going on here in Michigan, with the auto companies and Pfizer laying off workers.

within their means and deny the loan. That is the loan officer's job, to deny the loan if the debt/income ratio is too high. I worked as a loan officer at a credit union for 12 years and if the applicant's debt ratio is too high, we denied them. The lenders also are responsible for making these questionable loans.

credit checks-how many years on the job-income verification-references. first and last months rent plus security deposit. deposit on utilities but if you are lucky it`s included because you may owe money to the utilities.course forget about pets and some places children...

ya it`s really easy to rent...

it's a HELL of a lot easier to buy.

Especially if you have any credit or legal issues ANYTIME in your past...

The real bottom line reason is that housing has become a commodity in most of this benighted capitalist paradise. It's no longer where people LIVE but an investment to enrichen a small segment of the housing "industry" at the expense of (mostly) the renter...

If some of that money pissed away in Iraq had been used to seed low-moderate income housing, this wouldn't be an issue.

Good luck getting an apartment after a forclosure, job loss, and fucked up credit.
No landlord would rent to a person in such a position. Sad but true.
I think Edward's idea is a good one. Think about the common good, not just about your supposed tax "burden".

A lot of folks were shocked when the fine print resulted in loan payments jumping 30 -50% because of the variable rate changes

If the goverment wants to put in place more disclosure laws than already exist, great. However, people need to learn to be responsible for themselves.

Right

They made all those loans knowing full well the Fed would have to bail out their FAILED ASS INSTITUTION

You ever here of FDIC insured?

Well when the Banks Fuck up the Feds bail them out. Just ask Niel Bush - he knows all about it. But when John Q. Public gets into trouble lets change the bankruptcy laws so the corporations can jump all over him. EVEN IF THE GUY REFINANCED THE HOUSE TO AFFORD MEDICAL PROCEEDURES

NO THANKS KKKARL ROVE

Particularly since you are a recipient of taxpayer subsidies.

I wouldn't have a problem with that. But just an across the board bail-out, that is just wrong.

:wow:

So that it is in line with what they signed into, but other than that, this is fucking bullshit, I agree. If the banks want to do this on their own, fine. Or maybe even some targeted locations with excessive unemployment and plant closures.

But otherwise, it is exactly like everybody who didn't over-extend paying the consequences for those who did.

It would need an act of congress. Any time a bank forgives a person part of the loan, that's taxable income.

And I say that as a renter. I don't own a home now, because it's not right for me at this time.

People who own homes are more firmly rooted in their communities, more likely to care about the local public schools, more likely to vote, and more likely to care about the long-term well being in the neighborhood. No, I am not saying that renters do not.

I know that some people want to see more Americans living in cramped one bedroom apartments in public housing projects, but I don't think that's a sound housing policy.

As the flippers have driven prices up and up, renters are the ones who have been hurt. Now Edwards just wants to bail all those flippers out - and let them walk away with years of profits that have caused real suffeing to low income renters??? Set the interest on all these teaser and ARM loans, and if people can't make the payments they signed up for, then that's just the way it goes. I agree on homeownership, but I don't agree that we need to artificially prop up the housing market.

go down. This is in the interest of renters who are responsible and want to buy. In any event, as we have all known during this entire housing boom, the price of housing is going down. You will pay higher interest rates but get a house at a lower price. Based on my experience, the coming market is one in which to buy -- if you have preserved your good credit (because interest rates will be up eventually). Buy at a low price and high interest rate and then get a new loan when rates go down. That is what we did and we are happy.

You do not want the lenders to foreclose on all these houses and have no money to loan. If they renegotiate the loans, they will at least have income from the renegotiated loan. If the lenders foreclose and end up with houses sold for pennies on the dollar, where are they going to find the cash to lend to you so you can buy a house? That is when the government will be forced to step in to bail out the lenders. And you, the renter, will pay just like all other taxpayers. That is what Edwards' plan seeks to prevent. Under his plan, that point will not be reached. The foreclosures are extreme measures under the circumstances. If the market is allowed to free-fall everyone loses including people who would like to buy houses at cheaper rates. The complexity of the mortgage market has to be carefully analyzed.

Note that either way, existing property owners such as I will experience some loss in the value of their property regardless of whether these loans are renegotiated or allowed to go into default and result in huge losses to lenders. Lender liquidity, in my view, is key and is best served by giving incentives to lenders to renegotiate the loans they have with the people in the houses except in extreme cases (of which there are probably plenty) in which the buyers are so overwhelmed by the debt and the task of paying off their loans that the loans cannot be renegotiated. These loans should be allowed to go into foreclosure.

The bail out of lenders is what is wrong, not the renegotiation of the buyers' loans.

People without credit have to deal with an ever increasing cost of living - and don't have plastic to pay for emergencies, let alone needs. Those who put everything on credit and artificially inflated the cost of living - made it impossible for those at the bottom to even live. Many of them rolled that credit right onto their homes. So all these years, they were living high on the hog beyond their means, and you want to reward that? And the people who couldn't even keep up with rent because housing kept going up up up - too bad for them, they should have gotten on the gravy train?!?

This is wrong wrong wrong. Set the interest because those loans were wrong. But the housing market goes up and down and that's one of the risks you take when you buy.

But, at this point, everyone will pay the price of making those "bad" people pay no matter what is done. The time to have stopped the excessive lending and borrowing was 2003-2004.

In other words, you are absolutely right. A lot of people lived way above their means, borrowing against their homes. That was irresponsible and unfair. And you are right. That should not have been allowed. But it was.

Now, the question is not just who should pay the price but how great a price should be paid and how far should the suffering extend that paying price will cause? If you require the lenders and the borrowers to share the cost, the cost to the rest of us will be less than if you make the borrowers pay the cost by themselves. That is because if the borrowers are forced out of their homes, the lenders end up with a huge backlog of houses they have to sell off at bargain rates to speculators and investors. The lenders lose money. That will mean that all the people who have put their pension funds and their savings into the lenders' hands will lose their savings. The economy falls like a house of cards. If the banks have to be bailed out for huge losses, taxpayers will pay and taxes will have to go up. If people stay in their houses with renegotiated loans, the bail out will be much smaller.

So you see this is not just a moral issue. Yes, we should change the laws so that these abuses do not occur in the future. But if you take a punitive approach, all kinds of people who did not accept these outrageous loans and who have not been living above their means for years will suffer. So the wise approach is one that heals, one that does not worsen the situation, one does not result in the unwanted and unjust end that people who have been very prudent and worked very hard and saved suffer the loss of their savings or have to pay for a bail out through their taxes.

Remember Enron? The losses that Enron experienced meant hardship to a lot of people. The little guys paid the price even though they had done nothing wrong. That could happen here. Little people entrust their life savings to funds that are invested in the mortgage companies. They also take out loans based on the unrealistic but commonly shared belief that the homes are actually increasing in value at a very fast rate. A government bailout by taxpayers of those companies that does not also bail out the borrowers is just another way to make people who did not profit from the excesses pay. And, think about it. Who will benefit if the answer is allowing foreclosures to take their course and bailing out the lenders? The same people who made out in the savings and loans crisis. The big financial institutions who will end up buying the foreclosed houses in huge lots at extra cheap prices. The best thing is to minimize losses by motivating the lenders to restructure the loans. We want to keep ordinary Americans in their homes as home owners. We do not want to see huge banks, many of which are foreign owned owning these houses.

Ultimately the upheaval and economic loss will be much less catastrophic if you bail out the borrowers and motivate the lenders to keep individual homeowners in their homes than if you take a punitive approach.

until lenders decided to do something else during the GWB administration.

and other localized bubbles and busts, recessions, and other economic conditions. Things happen in economies and it's kind of pointless to tell people to be frugal if you're just going to turn around and bail them out because excess ruled the day. I agree that everybody ought to have their mortgage set to what they signed into, these loans were fraudulent in my opinion. But the ups and downs of people's lives, like that story in the NYTimes where the guy's income plummeted, how can we bail out all of them. Why should he get a bail-out but the person who maybe ended up homeless should just be shuffled aside.

Housing goes up, falls, plateaus, and then goes up again. It probably will this time too. But it's wrong to bail people out who bought bigger than their eyeballs while so many others couldn't even find a home because of all the speculation. It's just wrong.

and businesses.

And this plan is not a complete bailout. It makes the home buyer responsible for the mortgage up to market value, and makes the bank eat the loan they gave for over market value. It's an excellent compromise, because it should have been the bank who was in the best position to assess market value, and home buyers are reasonable to assume that banks are not lending them more than the house is worth in an effort to turn them into debt slaves (and if the banks were doing that, why shouldn't the government step in an right that wrong?).

That would be great but many who are losing their homes today in the sub-prime market were convinced they could afford much more home then they should have been swept into.
People in the area around here were convinced to purchase the $400K and higher homes when they should have been in the $180K price range instead.
Now those $450K homes really are probably only worth $350 tops but people were paying the inflated price because of supply and demand.

Too many were convinced to take on debt that they could not afford. Edwards plan would help right a wrong.

So as a renter in the S.F. bay area who was not "convinced" (eventhough there were plenty who would have offered me a loan) I should be responsible for those who were not responsible for themselves and are now foreclosing? What's the justice in that?

If Edwards' proposed bill is passed, smart lenders will take matters into their own hands, negotiate deals in which the loss is shared by the buyer in foreclosure and their lending institution, and the housing market will gradually level off at a level at which you can afford to buy a house. That is Edwards' goal. He is not just planning to bale out homebuyers. This plan will also bale out the economy -- and the lenders who could face a market in free-fall if they don't get some encouragement to make deals. Trust me, if the company that owns one of the huge high rises in S.F. gets in trouble and can't pay out the mortgage, some kind of deal is arranged. Either the building owner (borrower) gets an infusion of cash, sells the building or negotiates some kind of adjustment with the lender. I remember hearing a real estate lawyer explain about his business that lawyers review sales contracts in boom markets and negotiate deals in depressed markets. Either way, real estate lawyers keep busy. This is how markets (and lawyers) work.

of the last few years. The only reason California isn't officially bankrupt is the insane over-valuations of its real estate and the subsequent re-finance boom made possible by this scheme.

the devil is in the details but it`s a great start to make sure people have housing that they have a VESTED INTEREST in. if people have a vested interest in their property it is a SOCIAL GOOD to the neighborhood and the city.

if people and it`s government does not have a vested interest in the public good then our society and government fails

more than the home was reasonably going to be worth during the loan period (which is predictable since homes average about 1% appreciation per year over long term) and I like that it's available it only once too.

I think it's an excellent solution.

the longer the property sits idle the more the bank loses in value. several houses that sit idle for over a period of months effects that neighborhood's`s value. it`s in everyone`s interest to make sure the house is a home.

having overvalued the house.

They do not understand that a loan is very much like an investment. You don't invest or loan in a highly risky venture unless you have the money to lose. Yes. Lenders will and should take the loss. Edwards' plan encourages the lenders to make deals which, in the end will cut their losses as well as those of the buyers. The lenders are just throwing people into the bankruptcy courts.

This is reminiscent of the '30s when droughts and dust storms and failing banks caused farmers to lose their farms. Remember John Steinbeck's book, Grapes of Wrath. That is the crisis that Roosevelt responded too. Edwards' plan would prevent such a crisis. We do not need more homeless families. If the foreclosed homeowners have to pay off the amounts they still owe on their mortgages, they will have no money for rent and will end up sleeping in the SUVs some DUers want them to have to give up. This kind of vengeful economics does not work. It hurts everyone. If you own a home, you want to support Edwards' plan because it will help to keep the housing market healthier than it will be if laissez faire economics rules on this issue.

they should be required to turn in their new SUVs.

35,000 new-23,000 or best offer...someone bought it within the week..

our Conservative GOPers and their personal responsibilty
mantra.

Sometimes you have to help both sides to make a crisis reduce
to a problem to a way out.

IF foreclosures on millions of properties mean Bankruptcy of
Financials Institutions as well as loss of people's homes, you can
let society fail --recession, depression. Or you can let the
Financial Institution recoup as much as possible by restructuring
the loan so the buyer can continue payments. In this case both
sides win and lose a little something. Govenment helps bridge
the Gap. Government used wisely can do much good.

FDR was nobody's fool. He saved Capitalism and Democracy.

will cost everyone, not just the former owners and banks. I have heard the figure 7,000,000 being tossed about. Do you have any idea what that many foreclosed homes would do to our economy? Believe me, you'd take a far bigger beating if nothing is done than you would if Edwards' plan is implemented.

I think you need to really wrap your head around the fact that all of us are in this together. If that many of your fellow Americans get into that much trouble you cannot simply point and laugh because you didn't make the same mistake they did. You don't "win" just because some other poor schmoe loses. We all lose.

The time to prevent all of this from happening was 5 years ago or so, when banks were permitted to make such ridiculous loans to consumers. As a participant in the American economy those bad loans affected you almost as much as they affected the people who are now struggling to keep up with them. Your complaint is late, and directed at the wrong parties.

There is no reason in hell the government should bail out a homeowner. This means renters are bailing out homeowners. The poor would be bailing out the wealthy. This would be plain out and out wrong.

But the language does not make clear whether the banks or the homeowners are doing the subsidizing. If the banks are forced to subsidize the homeowners, this is not a problem unless the government bails out the banks. This cannot be allowed either.

As this tax incentive drives up the price of a house making houses less affordable.

John Edwards' Plan:

* Enact a Strong National Law against Predatory Mortgages: As president, Edwards will pass a strong national law to prohibit the worst abuses in the mortgage market: loan flipping, mandatory arbitration clauses, balloon loans, steep prepayment penalties, and other excessive fees. It would regulate all lenders, including non-bank finance companies, and strengthen underwriting standards to ensure that borrowers receive affordable loans suited to their means. Because abusive practices among some brokers are part of the problem, Edwards will ban broker kickbacks (yield-spread premiums) and work with states to establish uniform broker licensing standards and a national database for disciplinary infractions.
* Rewrite Certain Abusive Mortgages in Bankruptcy to Let Families Keep Their Homes: Many victims of predatory lending owe more on their mortgages than their homes are worth. These "underwater" mortgages are created by excessive interest charges or falling home values. Even if they declare bankruptcy, they must pay off their inflated mortgages in full or else lose their homes. As president, Edwards will let homeowners shed excessive mortgage debt in bankruptcy. They will be able to keep their homes by paying off their full market values and get new loans terms set by the courts. For example, a family owing $120,000 on a home worth $100,000 could cut its mortgage to $100,000, with the remaining $20,000 treated like other unsecured debt in bankruptcy. The relief would be available only once and at the discretion of the bankruptcy judge.
* Rescue Homeowners at Risk of Foreclosure: Many foreclosures can be avoided by timely help, such as renegotiating loan terms, finding a new lender, or catching up with past payments. Preventing foreclosures can also prevent vicious cycles that can bring down whole neighborhoods. Edwards proposed a national Home Rescue Fund to help prevent foreclosure. The Fund would work through local non-profits, government agencies, and community financial institutions. If necessary, the Federal Housing Administration, Fannie Mae, and Freddie Mac could work with community lenders to create affordable refinancing alternatives for these families.
* Hold Lenders and Investors Accountable: Edwards commends the FDIC for summoning lenders and Wall Street investors to a meeting discussing their role in the crisis. However, these conversations will only succeed if lenders and Wall Street give regulators specific commitments to mitigate foreclosures, such as waiving prepayment penalties, restructuring loan terms, and forgiving of back payments.

http://johnedwards.com/issues/predatory-mortgages/


When a buyer takes out a loan to buy a house, the lender or bank pays off the current seller. When the buyer cannot pay off the full loan, the lender forecloses. Usually, the lender ends up selling the foreclosed home on the market. The unpaid amount on that loan is called the deficiency. The foreclosed buyer may be required to pay that deficiency, but usually cannot. (In California, under certain circumstances, the foreclosed buyer may walk away without having to pay the deficiency on the first mortgage on the buyer's foreclosed home. The circumstances are too complex to discuss here.)

The lender may try to find a buyer of the foreclosed home that is willing to pay the remaining deficiency, i.e., to buy the house for the remaining amount owed on the loan. The problem right now is that the numbers of houses in foreclosure is high. In addition, buyers are not as easily qualifying for loans as during the boom market. Therefore, it is getting harder and harder for the lenders to sell the foreclosed houses for even anything near what is owed on the loans. The lenders are taking huge losses. That is why their companies' stock is falling.

Sooner or later, if trends continue in the direction they are now moving, lenders will start selling the foreclosed houses well below the value of the foreclosed loans. The cost of housing will go down. That is a good thing for people who are entering the housing market. But, if the market becomes flooded with cheap, foreclosed houses, the overall price of housing will decrease to a point that lenders and sellers of houses suffer huge losses. The people whose mortgages have been foreclosed will not be able to get loans to buy back their foreclosed houses at the new, low prices.

Edwards' plan would bring some stability to the housing market, avoid the chaos that massive foreclosures could cause and hopefully slow down (but not stop) the decrease in the market value of housing. There are other ways to deal with this. But just letting lenders foreclose and sell the houses for pennies on the dollar doesn't really serve anyone. Yes, people should be responsible for their decisions, but economic policy should not be used to punish people. The idea is to serve the general welfare. I'm rather dubious about the role of courts in Edwards' plan, but I like the underlying goal. I suspect that just raising the specter of allowing courts to set prices will cause the lenders to make deals with the buyers -- which is what they should do to save the housing market for themselves and for our economy.

Under Edwards' plan, the risk and penalty, if you will, for the bad decision (which was made by both lender who loaned to an unqualified borrower and by borrower who unwisely entered into a loan he or she could not pay) is shared. The fault is on the part of both the lender and the borrower, a fact we often forget. In fact, I could argue that the lender is more responsible than the borrower because the lender has greater expertise and should have known better than to enter into loans with individuals who did not have the means to pay off the loans.

I see nothing there about whether the government should do a bailout which is the crux of this issue. A government bailout would screw the renters, that is for the most part the poorer, in favor of the richer.

What is needed is not a bail-out, but renegotiation of the loans by the lenders and borrowers -- not by the government. The banks take a loss, no matter what happens from here on out. Often, the difference for the buyer in being able to pay off a loan or not is a few points in interest -- points that are pure profit for the bank. The banks would take the loss under Edwards' plan, but if you read my post, you will understand that the losses they will take will be less than the losses they are likely to take if the market goes into freefall and Edwards' plan is not adopted. The banks have more understanding of the markets than the buyers and therefore are actually more responsible for the current crisis than are the buyers. The banks have to take responsibility for having loaned money to buyers who were not really qualified to take the loans.

In any event, housing prices are headed downward -- and that will be good for people now renting who would like to get into the housing market to buy -- as well as those whose rent may go down as the value of rental properties also declines. This is typical boom and bust and we've all watched it coming. The lenders have played the game exploiting the hopes and dreams of naive buyers. They should take the losses. Edwards does not mention bale outs for a reason. They are not necessary.

is in JD's post and more appropriately describes most (if not all) of the criticism of this plan I've read in this thread.

Oh wait, that is ANOTHER in the long list of things he got wrong.

Much like Edwards failed tax policy, this is another in ideas that won't work because it doesn't address the problems.

We need to re-address the bankrupcy bill and classify certain mortgages as UNSECURED.

What a waste of a candidate.

is "Health Care" costs, not Mortgage Defaults. The other major cause is job loss.

You obviously don't understand the concept of Bankruptcy. It's to give someone a chance at a new start. It has also ALWAYS had provisions to allow one to keep one's home.

FYI, the government HEAVILY subsidizes home ownership! Where have you been?

"As president, Edwards will let homeowners shed excessive mortgage debt in bankruptcy."

Banks lend the money after they get an appraisal that satisfies them that this is adequate collateral. Shouldn't they be responsible for their financial decisions? All Edwards is saying is that the bank can have the collateral THEY determined was adequate to secure the loan. Males perfect sense.

it at that much. I don't think it is the appraisers fault either though, it isn't like it is an exact science. Real value is always what someone else is willing to pay and no one can ever judge what someone is going to be willing to pay in five years, it is a guess.

They never should have allowed the housing market to get as out of control as they did and they know it. Unfortunately I don't think congress will take any of the steps necessary to keep it from happening again someday.

When people should have been hitting the brakes because the prices were going up too fast they were instead cheering it on because homeowners felt like they were gaining so much in wealth. No goods created, no services rendered wealth. Which leads to problems.

Government should have a role in helping people attain housing. Not the five bedroom, 4000 sq foot kind of housing, which is what they were doing. But in influencing home builders to create affordable places people can buy. The 50k to 120k kind (depending on the part of the country you are in). Real pressure and requirements of builders to do that sort of thing, in my opinion, is where the fix starts.

I am a bankruptcy lawyer representing small business owners and farmers in my day job . . .

Homeowners could scrape off excess debt in bankruptcy prior to all the "reforms" of the Clinton and Bush Administrations.

Business owners (like airlines) have always been able to do it.

The "loss" is borne by the lender, not the taxpayers. The second mortgage lenders protect themselves by charging a higher interest rate to cover the increased default risk.

Seldom is the second mortgage used to acquire the house. It is usually taken out to cover medical bills, college for kids, refinance credit cards, etc.

I could go on, but people are talking past each other here.

FYI, Elizabeth Edwards practiced bankruptcy law . . . so John is getting good advice from somebody who has been in the trenches.

Why should all the breaks go towards the poorest? This plan sounds like it will finally provide relief to middle class families, the segment that is often ignored and left to fend for themselves.

Many folks were sold a bill of goods and now face possible foreclosure. It is completely ridiculous that commercial mortgages are susceptible to bankruptcy proceedings but not residential mortgages.

I'm glad that my congressperson Keith Ellison announced a couple months ago that he is working on legislation that would make it possible to restructure mortgage debt in bankruptcy.

Here is a story from public radio . . .

http://minnesota.publicradio.org/display/web/2007/06/20/proposed_change_in_bankruptcy_law_could_thwart__foreclosures/

Proposed change in bankruptcy law could thwart foreclosures
by Annie Baxter, Minnesota Public Radio
June 20, 2007

Current bankruptcy law allows a person to restructure all kinds of debts, but it provides little shelter for a person's primary shelter: the home.

This isn't anything new. A provision in the U.S. Bankruptcy Code dating to 1978 does not allow bankruptcy filers to modify mortgage debt for their primary residences. A number of consumer groups, and at least one member of Congress, think the law should be changed to help people avoid foreclosure.

"There's not much a bankruptcy judge can do to set up a payment structure that would allow a person to stay in their home," says Minnesota DFL Congressman Keith Ellison.

He's working on legislation that would make it possible to restructure mortgage debt in bankruptcy. Ellison sees an urgency to this proposal, given the record number of foreclosures nationwide, including in his own district.

"Bankruptcy judges do have discretion with businesses, with second residences, and all sorts of other ways they can restructure debt on other things," he says. "But when it comes to a primary residence, they just don't have much flexibility."

Kris Wilson, a senior loan officer at Summit Mortgage in Bloomington, says changing the bankruptcy laws would make a lot of sense to her.

"I think that would be wonderful," she exclaims. Wilson originates loans; her business is not on the servicing side of lending. But she says she can readily imagine the kind of homeowner who would benefit from a change in the bankruptcy law.

* * *

http://minnesota.publicradio.org/display/web/2007/06/20/proposed_change_in_bankruptcy_law_could_thwart__foreclosures/

Because they often can't do anything with them.