Tag: mortgage

  • Who Speaks for Mortgage “Lenders”?

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    Adam Levitin

    Katie Porter makes an incredibly important point in her recent post about how securitization structures may be impeding mortgage modifications because the ultimate holders of risk on the mortgages are not the ones involved in the modification decision.  Mortgage servicers, who typically hold a small interest (if any) in the
    loans are the ones making the modification decisions.  When servicers
    do hold positions in the mortgage-backed securities, they are first
    lost positions, so the servicers likely takes a loss regardless of a
    modification or foreclosure, meaning that their interests are not
    aligned with the other MBS holders.

    Let me take Katie’s post a step further and suggest that the relevant voices on the lending side of the mortgage market have not been heard.  The ultimate risk on mortgages is held by mortgage-backed securities holders, private mortgage insurers, and pool-level bond insurers.  These parties have been entirely absent from the conversation on modification and bankruptcy reform. 

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  • HOPE Now January Report

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    Adam Levitin

    HOPE Now, the government-encouraged alliance of mortgage servicers assembled to facilitate mortgage workouts, has released its January 2008 numbers. There’s good and bad news in these numbers.

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  • What the Foreclosure Mess Tells Us About Private Student Loan Dischargeability

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    Adam Levitin

    The most recent attempt to roll back some of the BAPCPA’s limitations on the scope of the bankruptcy discharge seems to have faltered in the House. The House passed an education bill, but without a proposed amendment that would have made private student loans dischargeable in bankruptcy, as they were before October 2005, was voted down. A Senate bill (S.1561) sponsored by Dick Durbin (D-Ill.) that proposes making the private loans dischargeable is still in committee. (For a discussion of the legislation see here.)

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  • Will the Mortgage Industry Fix the Mortgage Mess Itself? A Look at Project Lifeline

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    Adam Levitin

    The mortgage industry has been arguing against bankruptcy reform legislation that would permit the court-supervised modification of single-family principal home mortgages in bankruptcy. The industry argues that permitting mortgage modification in bankruptcy would result in higher interest rates and that its private efforts will solve the problem. In an earlier post and in a working paper, I have shown that we are unlikely to see higher interest rates as a result of allowing bankruptcy modification. Here, though, I want to take issue with the mortgage industry’s claim that its private efforts will solve the problem.

    Hopefully the mortgage industry is correct about this. But there is good reason to doubt the efficacy of the industry’s efforts. To date, the mortgage industry’s efforts to fix the foreclosure crisis have been a lot of sizzle, but not much steak. Unfortunately, this seems to be the case with Project Lifeline, the latest half-measure to come out of the mortgage industry. As I explain below, the very structure of Project Lifeline means that homeowners in a significant number of states will be unable to take advantage of Project Lifeline’s meager offering because it will kick in only after their homes have been sold in foreclosure.

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  • House Judiciary Cramdown Hearing

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    Adam Levitin

    A great thing about teaching in Washington, D.C., is the ability to drop in on legislative hearings. Today I went to a House Judiciary subcommittee hearing on the cramdown bill, also known as the Emergency Home Ownership and Mortgage Equity Protection Act of 2007(HR 3609). A report is below the break.

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  • More Bogus Numbers from the Mortgage Industry

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    Adam Levitin

    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.

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  • Is This Just a “Sub-Prime” Mortgage Crisis?

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    Adam Levitin

    The current home mortgage crisis is often referred to as a “subprime” crisis. That’s useful shorthand, but it really isn’t accurate and unfortunately obfuscates the scope of the problem. The mortgage problem isn’t just limited to subprime. It extends beyond it in (at least) two ways.

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