Tag: subprime mortgage

  • Credit Cards and the Mortgage Meltdown

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    Elizabeth Warren

    The role of subprime lenders in inflating the housing bubble, then bringing down the whole economy has received plenty of headlines.  But there has been little attention paid to the role of credit card lending and BAPCPA in the current home foreclosure crisis. 

    A new academic paper, Bankruptcy Reform and Foreclosure, argues that the 2005 bankruptcy amendments are deepening the mortgage crisis. The article was written by David Bernstein, an economist at the U.S. Treasury who chose to post this analysis as private citizen listing only his home address and home e-mail address.  Drawing on data from the Survey of Consumer Finance, he links credit card debt, access to bankruptcy, and mortgage foreclosures. If more families could use bankruptcy to deal with their credit card debts, more could avoid foreclosure on their homes.

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  • When Kids Lose Their Homes

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    Elizabeth Warren

    The ABLJ just published a new paper, Parents in Financial Crisis: Fighting to Save the Family Home.  The paper uses data from the 2001 Consumer Bankruptcy Project to examine the differences in how hard people struggle to save a home based on the presence–or absence–of minor children in the house. The data support the claim that families with children work harder to try to hang on to home both before and during bankruptcy.  The finding is consistent with the thesis that families buy homes as a way to buy opportunities for their children (schools, neighborhoods) and that the potential loss of a home is more painful to parents who fear the lifetime impact of the loss on their children.

    The data pre-date the current mortgage crisis, but they are useful on several levels for thinking about what is happening now. At one level, the data reported in Parents in Financial Crisis are a reminder of the impact of a wave of foreclosures.  For adults to pick up stakes and move to a rental in a less desirable part of town can be painful, but they can go to the same work every day and continue the same after-work activities.  For a child, however, foreclosure may mean transferring to a weaker school, losing a chance to play in the band or on a softball team, dropping out of a scout troop, and losing all the friends she has ever known.  Sure, we’re a highly mobile society, and children move all the time.  But a move to a nicer house or a move so mom can take a better job is a move that most parents undertake at least in part with an eye toward improving a child’s lifetime chances. A move from a foreclosure is not a move up.

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  • Banks: State Laws Not for Us

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    Elizabeth Warren

    Just when you think the mortgage mess can’t get any worse, the banks come up with a new idea: They shouldn’t have to obey state law when they foreclose on someone’s home. 

    Pre-emption has been a gravy train for the national banks, insulating their credit card business from state laws. Some banks now want another ride on the pre-emption train, claiming that they shouldn’t have to follow local foreclosure laws when they take people’s homes.

    Tomorrow Congressmen Brad Miller (D, NC) and Steve LaTourette (R, OH) will introduce HR 5380 to make it clear that the banks have to follow the state law foreclosure laws, just like they always have. Amazingly, this is expected to be a close vote. 

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