• 50-Year Mortgages? The Numbers Don’t Add Up

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    Adam Levitin

    The Trump administration has tried to seize the affordability mantle by proposing a move to 50-year mortgages. Unfortunately, the math doesn’t add up: a 50-year mortgage is a pretty bad idea.

    The United States is unique globally in that our dominant mortgage product is the 30-year, fixed-rate, fully-prepayable, fully-amortized mortgage. The 30-year fixed is the American mortgage, and it is a wonderful financial product. It’s also one that only exists because of substantial government involvement in the market. But shifting it out to a 50-undermines the benefits of the product. (more…)

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  • CFPB Funding Sophistry from the Office of Legal Counsel

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    Adam Levitin

    It takes real skill to bankrupt a government agency, particularly one that is barely functioning. Yet that’s exactly what Russell Vought is trying to do. Vought, you might recall, is the acting Director of the CFPB, and last February he made a big show of declining to draw down funds for the CFPB from the Federal Reserve System, claiming that the Bureau had more than adequate funds on hand. Vought then embarked on a campaign to fire most of the CFPB’s workforce, resulting in significant attrition, even if his efforts remain tied up in court. But now Vought—and remember that this is the guy who also runs the Office of Management and Budget—is claiming that the CFPB will run out of money in early 2026. He claims that the CFPB, relying on a newly issued opinion from the Department of Justice’s Office of Legal Counsel, can only draw down funds on the Federal Reserve System when the system runs a profit, which it is not currently doing.

    Three observations about this incredibly cynical play.

    (more…)

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  • Hospitals Suing Patients – A New Study

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    Melissa Jacoby

    screen shot of SSRN title and author list and beginning of abstract

    My first post on the original Credit Slips was about medical billing and collection; so is this first post on the new Credit Slips. I write to encourage more of you to read Hospitals Suing Patients: The Rise of Stealth Intermediaries, posted this summer on the Social Science Research Network.  This study, by law professor Barak Richman and coauthors at Stanford University’s Clinical Excellence Research Center reports on a hospital’s recent use of collection agencies to sue and enforce judgments (many of which were based on “unsubstantiated and inaccurate billing records”) against patients, and the impact of state law efforts to increase transparency in debt collection. And herein lies the end of my first post on the new Credit Slips, if only to expedite your decision to download this study.

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  • The Letitia James Indictment Falls Short

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    Adam Levitin

    I’m unaware of the federal government having previously charged anyone for fraud based on renting out a second home. Yet that’s what we have with the Letitia James mortgage fraud indictment. We don’t have all the facts available, but based on what is in the indictment, it’s clear why the career prosecutors in the Eastern District of Virginia refused to bring a case:  James doesn’t appear to have made any misrepresentation in her mortgage because the mortgage does not directly prohibit rentals.

    (more…)

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  • Faux Tuition Freezes and Nerd Subsidies: Trump’s Half-Baked Ideas for Higher Education Reform

    Posted by

    Adam Levitin

    There’s been plenty of coverage of the First Amendment implications of President Trump’s proposed “Compact for Academic Excellence in Higher Education” that was offered to nine universities in exchange for supposedly gaining preferential access to federal grants. But the proposal also has a pair of tuition regulation requirements that have not gotten so much attention, but are in some ways equally troubling.

    The “deal” being offered would require, among other things, that university signatories agree to freeze tuition for U.S. students for five years and, if endowments exceed $2 million per undergraduate, grant free tuition for students pursuing “hard science” programs.

    This sort of federal price regulation is, as far as I’m aware, completely unprecedented. It’s also completely half-baked policy thinking. The impulse to control the cost of higher education is commendable, but the President’s proposal shows a complete lack of understanding of higher education economics and of the science education in particular. Instead, what he has proposed are faux cost controls and a bizarro nerd subsidy that would apply to almost no schools. In other words, rather than serious policy proposals to deal with costs of higher education and to encourage the study of the sciences, the administration has put forth a set of meaningless headline grabbing proposals that would only make things worse.

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  • Singapore’s “Debt Relief Agency” Proposal and Flashbacks to BAPCPA

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    Jason Kilborn

    The Singapore Ministry of Law has launched a public consultation on some proposed personal insolvency amendments, and one in particular struck a nerve based on the disaster of BAPCPA: “MinLaw proposes to introduce a new criminal offence which criminalises the soliciting and canvassing, in the course of any business, of any person to make a bankruptcy application.” The proposed punishment is a S$10,000 fine, three years in jail, or both! The justification for this aggressive proposal is a supposed “increase in the number of debtor-initiated bankruptcy applications where debtors borrow irresponsibly to pay for … consultancy firms’ services in helping them apply for bankruptcy” with the supposed intent of “abusing the [debt repayment scheme] to obtain a discount off their debts.” Sound familiar? This is reminiscent of section 526(a)(4) of the US Bankruptcy Code, introduced in the 2005 disaster, that forbids “debt relief agencies” to “advise an assisted person … to incur more debt in contemplation of such person filing a case under this title or to pay an attorney or bankruptcy petition preparer” for preparing such a filing. (more…)

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  • Follow Us on Bluesky

    Posted by

    Bob Lawless

    With the move to WordPress, we can now connect the blog to our Bluesky account. Our posts should now automatically post there. A good way to keep updated on our content is to follow us on Bluesky — @creditslipsblog.bsky.social. No promises, but if there are other social media sites on which you like to see our content, I would be interested to hear your comments.

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  • Welcome to the New Credit Slips

    Posted by

    Bob Lawless

    This is the new Credits Slips! A few things have changed, and most things are the same. Most importantly, you will continue to find us here at this same URL. We hope you like the new, cleaner design. If you are reading us on an RSS feed, you will need to change the feed URL to our new one (https://creditslips.org/feed/). All of the old posts have been imported to this new site. Linked files and images might have disappeared on old posts.

    Most significantly, the author team has changed a bit. We welcome Professor Christopher Odinet from Texas A&M. He is another of our commercial and insolvency law junkies, and he adds significant expertise to the blogging team with his knowledge of digital assets.

    Thank you for being a reader. We look forward to bringing you the same content here as we always have.

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  • Hotel California (Deposit Account Edition)

    Posted by

    Adam Levitin

    You can checkout anytime you like, but you can never leave. That’s how I’m feeling about one of my banks. I recently decided to close a particular bank account. Turns out that the bank, which allows me to open new accounts on-line, won’t allow me to close accounts except in person. Having to go into a branch is a minor inconvenience, and I’m sure that’s the point: the added friction makes it that much harder to break up with the bank and gives the bank another opportunity to try to sell me additional services. What’s more, it gives the bank another shot at levying some fees on the account for one reason or another.

    If pressed, I’m guessing that the bank would claim some security issue means that they need to verify my identity in-person. That’s nonsense:  they had no problem letting me clear out the balance via an on-line transaction. This is just about making the deposit account relationship stickier and therefore less competitive.

    So if there’s still anyone home and listening at CFPB, this should be low-hanging non-partisan fruit: use your UDAAP authority to put out a Hotel California rule that will make it easier for consumers to voluntarily close their deposit accounts. Think of this as the deposit account version of click-to-cancel. If the consumer is able to transfer all funds out of the account on-line—that is if the bank offers on-line funds transfers and there’s no hold on the account at the time—the consumer should also be able to close the account entirely on-line.

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  • Bill Pulte’s Looking for Mortgage Fraud in the Wrong Place

    Posted by

    Adam Levitin

    Reuters is reporting that Lisa Cook scheduled her Atlanta property as a vacation home on a loan estimate from her lender. That indicates that the lender was aware that the property was not going to be used as Cook’s principal residence. It’s going to be pretty hard to sustain a mortgage fraud prosecution in the face of the loan estimate.

    Consistent with the indication that the Atlanta property was a vacation home, Cook didn’t claim a primary residence tax deduction for it (unlike what Pulte’s own parents did for their properties!).

    If Reuters was able to unearth the Cook loan application materials, surely Pulte should have been able to do so. Either Pulte was wildly reckless by making the referral without pulling the loan file, including the application materials, or he proceeded despite having the loan file, which suggests that he acted maliciously. Regardless of whether Pulte acted recklessly or maliciously, his actions here are more than cause for his removal.

    The Cook’s declaration of the property as a second home also suggests that if there was fraud—and it’s far from clear that there was—that it wasn’t by Cook, but by either the loan officer or her credit union. The loan officer might have wanted to facilitate the loan closing, while the credit union would have gotten a better price from Fannie/Freddie for a principal residence mortgage than for a second home mortgage. We’d need a lot more information to know if there was fraud and by whom, but if Cook had alerted the credit union that the property was a second home, I can’t see how this could rise to a criminal issue for her.

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