Post by unlawflcombatnt on Apr 15, 2007 15:05:33 GMT -6
Below are excerpts from an article from Patrick.net, titled Bankruptcy May Not Save Homes. The article chronicles the ongoing saga of increasing home foreclosures, as well as showing how the new bankruptcy law may actually be increasing the number of foreclosures. Since struggling home-buyers are not able to reduce the non-mortgage debt burden as much as previously, it's making it even harder to keep up with their mortgage payments.
Thus, when the greedy banking/credit card/mortgage lender industries got their bankruptcy bill passed, they may shot themselves in the foot. More people will now default on their mortgages as a result of the bill-- causing more mortgage originators to go under, and more MBS investors to lose money. Their greed may have finally caught up with them.
"Bankruptcy May Not Save Homes
Filing Isn't Helping Many Borrowers Avoid Foreclosure
By LINGLING WEI
April 12, 2007
More financially stretched borrowers are realizing even declaring bankruptcy can't save their homes from foreclosure.
Take, for example, Bernice and Harlan King in Cleveland. The couple, saddled with about $30,000 in credit-card and other debts and behind on their $1,650 monthly mortgage payments, filed Chapter 13 late last year to prevent their mortgage lender from repossessing their house.... Now they are giving up, and their house is heading for foreclosure...
The Kings and people like them present a worrisome trend for investors in mortgage-backed bonds already spooked by soaring delinquencies and defaults on home loans to people with the weakest credit. According to a study released in March by Credit Suisse Group, more subprime borrowers are turning to bankruptcy court to stave off foreclosure, as softening housing prices make it harder for them to sell their homes to repay debts.
At the same time, the study shows, the number of borrowers who are actually able to bring current their mortgage payments through bankruptcy is declining, and more filers are ultimately turning their homes over to the lenders. The finding means investors in high-yielding mortgage-backed securities should expect higher losses on the underlying collateral.
At least part of the blame, says the report, lies with a bankruptcy law passed in 2005. The law raised the bar for people to qualify for Chapter 7 "fresh start" bankruptcy proceedings. Chapter 7 can enable individual filers to wipe away debts such as credit-card and medical bills so they can continue to make their mortgage payments. With access limited, more subprime borrowers are forced into Chapter 13, where some can't maintain their payment schedules for more than a couple of months.
The Kings, for example, had thought about filing Chapter 7, but made too much money to pass the new bankruptcy law's means test, said Mr. King, an airline baggage handler.
"It's become harder to file for Chapter 7 to release debt burdens," said Jay Guo, a director in Credit Suisse's asset-backed securities research group in New York and the lead author of the study. "Going forward," he added, "delinquent loans are more likely to go into foreclosure directly rather than into bankruptcy," resulting in higher losses for mortgage-bond investors...
Many borrowers complain that lenders and loan servicers sometimes stop helping them after they file Chapter 13 for fear of appearing to be trying to collect, which is barred under the bankruptcy law... "
The entire article, courtesy of Patrick.net, can be found at:
Bankruptcy May Not Save Homes
Thus, when the greedy banking/credit card/mortgage lender industries got their bankruptcy bill passed, they may shot themselves in the foot. More people will now default on their mortgages as a result of the bill-- causing more mortgage originators to go under, and more MBS investors to lose money. Their greed may have finally caught up with them.
"Bankruptcy May Not Save Homes
Filing Isn't Helping Many Borrowers Avoid Foreclosure
By LINGLING WEI
April 12, 2007
More financially stretched borrowers are realizing even declaring bankruptcy can't save their homes from foreclosure.
Take, for example, Bernice and Harlan King in Cleveland. The couple, saddled with about $30,000 in credit-card and other debts and behind on their $1,650 monthly mortgage payments, filed Chapter 13 late last year to prevent their mortgage lender from repossessing their house.... Now they are giving up, and their house is heading for foreclosure...
The Kings and people like them present a worrisome trend for investors in mortgage-backed bonds already spooked by soaring delinquencies and defaults on home loans to people with the weakest credit. According to a study released in March by Credit Suisse Group, more subprime borrowers are turning to bankruptcy court to stave off foreclosure, as softening housing prices make it harder for them to sell their homes to repay debts.
At the same time, the study shows, the number of borrowers who are actually able to bring current their mortgage payments through bankruptcy is declining, and more filers are ultimately turning their homes over to the lenders. The finding means investors in high-yielding mortgage-backed securities should expect higher losses on the underlying collateral.
At least part of the blame, says the report, lies with a bankruptcy law passed in 2005. The law raised the bar for people to qualify for Chapter 7 "fresh start" bankruptcy proceedings. Chapter 7 can enable individual filers to wipe away debts such as credit-card and medical bills so they can continue to make their mortgage payments. With access limited, more subprime borrowers are forced into Chapter 13, where some can't maintain their payment schedules for more than a couple of months.
The Kings, for example, had thought about filing Chapter 7, but made too much money to pass the new bankruptcy law's means test, said Mr. King, an airline baggage handler.
"It's become harder to file for Chapter 7 to release debt burdens," said Jay Guo, a director in Credit Suisse's asset-backed securities research group in New York and the lead author of the study. "Going forward," he added, "delinquent loans are more likely to go into foreclosure directly rather than into bankruptcy," resulting in higher losses for mortgage-bond investors...
Many borrowers complain that lenders and loan servicers sometimes stop helping them after they file Chapter 13 for fear of appearing to be trying to collect, which is barred under the bankruptcy law... "
The entire article, courtesy of Patrick.net, can be found at:
Bankruptcy May Not Save Homes