C'mon, Ron - vote "yes" - you know you want to.

What you're failing to comprehend is the consequences of making a mortgage a less secure item of collateral - what effect will that have on someone wanting to buy a house tomorrow? And what effect will that have on somebody trying to sell a house for whatever reason (including to stave off foreclosure) the day after that?

it's not that i am failing to comprehend that, it's simply that this has been the first time that somebody has mentioned this issue in this thread.

it sure might have a chilling effect but, then again, lenders do need to make loans to make money so i am fairly certain that the pendulum will swing back a bit.

needless to say (lol j/k i HAVE to say it), creditors who have sounder underwriting standards as a result of this probably won't have much to worry about (ie, the risk of general job loss and death bk'y is already 'priced' in and, now, more robust economic/market considerations are 'priced' in as well. fraud is still not a viable way to use this system to your advantage and the creditworthiness attributes of a bk'y mark still apply.).

Job loss is not "priced" in now, since a borrower cannot presently file bankruptcy and reduce their mortgage obligation.

Allow that (as this proposed law does), and the risk that some portion of mortgage borrowers will file bankruptcy and lower their debt will be spread across all mortgage borrowers i.e. higher rates.

Don't you see how more of "little guys" will be hurt by that. In trying to protect some consumers, all consumers are harmed to some extent.

This is not complex economics, it's very very simple. If you isolate all the other factors and increase the risk that borrowers will be able to lower the rate, lower the payments, or (worst of all) reduce the contract balance to the new lower value of the home, there can only be three results:

1) cost of credit increases;
2) availability of credit decreases; or
3) some combination of 1 and 2.

If you think that there's too much credit available and availability should be reduced maybe you think this is a good thing.

(Straw, I'm not arguing with you - I just used "quick reply" and yours was the last post.)

Don't worry. Ron will make this complex economics.

Don't feel bad about all the BS being pushed here, Huge Ron - keep in mind, this group probably includes the same people that have created the mess in the banking world that we are facing today. Yes, they state that their institution isn't directly involved, but I wonder about that.

On the other hand, this group may not be directly involved and have no idea what in ____ is going on around them.

love the avi _X_, but really I am a cowboy

would an actuary say that there is no chance that people could die or lose their job? no?

ok, so since you answered yes, is the risk of this priced into the rate?

true or false?

again, true or false?

again...

Sure you are Huge Pale, but the avartar is how others see you, not how you see yourself.

just to be clear, you are isolating the likelihood that a debtor will pursue bankruptcy to swindle, there aren't other issues related to this decision like what bk'y actually does to a person's credit/'character', courts will actually cram down for sport and creditors aren't adjusting their underwriting procedures as a result of the credit-fiasco-compounded just to name a few?

and will the market not have entities who will find a way to make a profit in this new environment?

i think that more discipline on the part of creditors is a manifestly good thing.

someone needs to discipline Gozy

I never said that debtors are pursuing bankruptcy to swindle - it's not swindling to do what the law specifies should be done in your bankruptcy case.

And I don't think bankruptcy judges cram down "for sport." They don't do it at all unless the debtor asks for it.

All I'm saying is that if you increase the bad effects of bankruptcy on mortgage loans, the cost of mortgage loans will go up, availability will go down, or both. The impact of bankruptcy on a person's credit is the same either way, so that doesn't have anything to do with what we're talking about.

And if you don't think creditors are adjusting their underwriting, you're not living in the real world. People who could get credit easily before can't now. I don't think that's a bad thing, but it doesn't make the bankruptcy bill good - they're unrelated issues.

i know/hope they are, too!!!


while this will happen in the short term, i think that over the long term the market will adapt because people want to borrow and lenders want to make money.

now, i'm not sure how you don't think that we are talking about the merits/impact of the new bk'y law but we are. the things that i mentioned are related to this notion being alluded to that this is some great handout (ie without consequences) to debtors who are proclaiming "i'm rich, _____!"

as to why the bill is/isn't good, i am of the opinion that soft landings are best for this market. i think that this might be a way to move toward a soft-landing rather than crippling one party to the transaction. creditors are still going to get their money or at least some of it (and perhaps that is a not a bad deal for them since they honestly shouldn't have expected the contractual terms based on their apparent lack-of-financial/economics awareness). debtors will be able to continue consuming and feeding the economy.

Why shouldn't they have expected the contractual terms????? Are you saying they should have expected that Congress would change the law to abrogate their contracts?

Maybe they shouldn't have expected that the debtors would pay, but that's different. Debtor doesn't pay, creditor forecloses, takes what it can get and moves on. That's the terms of their contract (and foreclosure law).

I am fine with letting creditors suffer the consequences of their loan decisions, and that's what current law does. This change would artificially make those consequences worse - I don't get how that's a good thing.

you left out the first part of my parenthetical. if you would've included it, it is a lot easier to see that my point there was to say that their expectations of returns in a real estate bubble should've been a bit more conservative; they did business as though they bubble happening in front of their nose didn't exist.


i disagree. their lending assumptions by definition said that they expected the normal rate of foreclosures.


in a micro and short term sense, perhaps. but in the long term, a soft landing is better for everyone.

[quote=Gozer]

Was every mortgage made in the last 5 years crooked?

You really think every lender is like Shylock in the "Merchant of Venice" don't you.

Higher lending costs are better for consumers?

I can't wait if this passes to hear the next wave of reform - rate and fee caps on real estate loans, because that will be next.

And Ron will lead the charge.

THe more regulations the better. Someday we will all be protected by the government.

how much higher, straw? factor in demand for loans/demand for profits as well as consumer psychology/confidence/spending in general before you answer.

is every debtor who made a note in the last 5 years defaulting?

According to you, no higher costs since its already priced in.

You know all Ron.

I however, don't need 30 different college degrees to know that if you increase uncertainty, you will increase costs and the proposed law change would increase uncertainty.

But I am sure you do not believe that auto rates are higher due to BK than if cramdowns weren't allowed.

The odd thing is that we evaluate loan losses by category as a cost factor for loan rates. But what do we know.

Is every defaulting debtor in a bad deal?

By the way, poll is 10 to 0 saying you have no idea what you are talking about, but please keep going with it. Just keeps proving the point.

1) If you write a 4 line sentence, don't be surprised when I don't quote the whole thing!

2) If their expectations should have been more conservative, why not just let them suffer the consequences of those wrong expectations? That's what would happen now. Instead, you want to penalize them.