The past few months have seen story after story about fraud in the mortgage industry. Now we’re seeing a new type of fraud–mortgage lobbying fraud. The Mortgage Bankers Association has been claiming the proposed bankruptcy reform legislation that would significantly roll back the special treatment given to mortgage lenders in chapter 13 bankruptcies would result in residential mortgage interest rates rising 1.5 to 2 percent. (Somehow this number started at 2% and has drifted down to 1.5% without any explanation.) The MBA’s number is pure and demonstrable hokum. As Joshua Goodman, a Columbia University economist and I show in a new working paper, permitting bankruptcy modification is likely to have little or no impact on mortgage interest rates or origination volumes. Keep reading below the break for the proof.
Tag: bankruptcy
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Bankruptcy at the Dem’s Debate
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I think this blog has been really good at eschewing electoral politics issues, and I don’t want to be the one to change that. Serendipitously, though, during the five minutes I had the TV on watching the Democratic debate, Tim Russert asked the Democratic candidates tonight about bankruptcy reform and their past positions on bankruptcy legislation, and the occasion cries out for a blog post.
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Debt Slavery? Correlation of Slavery with Chapter 13 Filing Patterns
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Looking at Bob’s posting of chapter 7 and 13 filing rates, I couldn’t help but notice the correlation between high chapter 13 filing rates and states in which slavery was legal until 1863 (the “South” broadly speaking). The 11 jurisdictions with the highest rate of chapter 13 filings (and all of those with over half the filings being 13s) were slave states. The top 9 (and but for Lincoln imposing martial law in Maryland, the top 11) states were all part of the Confederacy. With a few of exceptions, all former slave states were in the top 15.
What are we to make of this this correlation?
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Credit Card Charge-Off Rates
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It’s great to be a permanent addition to Credit Slips. This blog has become a really great forum for discussing credit and debt issues, and I’m looking forward to contributing to the conversation. It’s a nice way to start a new year.
As it is New Year’s Eve, people are making resolutions, including about their finances, and that puts me in the mood to think about how to measure the effect of the BAPCPA on bankruptcy and credit. (Happy New Year, btw).
One way to measure the effect of the BAPCPA is to look at credit card charge-off rates. Credit card issuers have to charge off debts that are 180 days delinquent or otherwise uncollectable, such as by a bankruptcy discharge. Below the break are two graphs (my apologies for the HTML layout issues), one showing historical credit card charge-off levels, and the other the percentage of those charge-offs related to bankruptcy.
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Bankruptcy Claims Trading: Part I
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Let me turn to a true bankruptcy nerd topic tonight—corporate bankruptcy claims trading. Bankruptcy claims trading is the buying and selling of claims against a bankrupt corporate debtor. (Trading in consumer bankruptcy claims is an issue that has not been academically explored to the best of my knowledge.)
Bankruptcy claims trading is virtually unregulated in the U.S. Although claims trades can effect changes in corporate control, they are not subject to securities or mergers and acquisitions regulation. There is also little case law on bankruptcy claims trades; my next post will address a very recent decision in the Enron bankruptcy that is the most significant to date.
So who on earth would want to buy a bankruptcy claim?
