The nation faces a foreclosure crisis of historic proportions, and there is an understandable desire on the part of the federal government to "do something" to help. House Judiciary Chairman John Conyers's bill, which is moving swiftly through Congress (and companion legislation introduced by Sen. Richard Durbin) would allow bankruptcy judges to modify home mortgages by reducing both the interest rate and principal amount on the loan. This would be a profound mistake.Since the other alternatives would be to do nothing, let the "Free Market" do its thing, and allow hundreds of thousands of people to lose their homes, or for Congress to intervene in some other way, like, say, a foreclosure freeze, thereby removing any incentive to repay a mortgage, I think the answer is simple. Give homeowners the same rights as owners of commercial property, apartments, and vacation homes, and pass the strip-down bill.
February 13, 2009
The Mortgage Industry Responds: Prof. Todd Zywicki, the legal craftsman behind the 2005 BARF Act, reviews the consequences resulting from his handiwork, and punts: