Lo and behold, the Times did decide to publish a piece by another writer on the same subject yesterday, a former politico named Jack Kemp. It's an excellent piece, making the conservative argument for a more liberal bankruptcy law:
I applaud the White House efforts to encourage mortgage servicers to modify existing adjustable-rate loans for a limited number of borrowers who cannot afford interest rate resets. However, depending solely on the goodwill of an industry that bears no small measure of responsibility in this crisis is unlikely to be the full answer.I have a number of other proposals to reform the bankruptcy law to enable delinquent homeowners to keep their homes while paying down their default, here, here and here.
What is missing is a rational and urgent push to help the estimated 2.2 million families in danger of losing their homes to foreclosure in the near future. Congress is considering a small fix that would have more impact on these families than any other option under consideration: temporarily allowing bankruptcy courts to give the same relief to homeowners on principal-residence mortgages that businesspeople get on real estate investment loans, that farmers get on farm loans and that individuals receive on loans for vacation homes, cars, trucks and boats.
Bankruptcy law is wildly off-kilter in how it treats homeownership. Under current law, courts can lower unreasonably high interest rates on secured loans, reschedule secured loan payments to make them more affordable and adjust the secured portion of loans down to the fair market value of the underlying property -- all secured loans, that is, except those secured by the debtor's home. This gaping loophole threatens the most vulnerable with the loss of their most valuable assets -- their homes -- and leaves untouched their largest liabilities -- their mortgages.
In the absence of modification, many of today's loans will result in foreclosure. When servicers are unwilling or unable to voluntarily modify exploding, unsustainable home mortgage loans, Congress has a duty to consider involuntary modification in bankruptcy court, where the same relief is granted on all other secured loans. The proposed Emergency Home Ownership and Mortgage Equity Protection Act being considered by Congress would do just that. It is targeted at only sub-prime and nontraditional mortgages and will be available for only seven years after it is enacted in order to mitigate against the next wave of exploding interest rate resets.