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Author: Matthew N. Luzzetti Publisher: ISBN: Category : Languages : en Pages : 47
Book Description
Reforms made to the U.S. Bankruptcy Code in 2005 instituted a new means testing requirement that restricts the discharge of unsecured debt under Chapter 7 to filers with income below their state's median, thereby forcing filers with income above their state's median into a costly Chapter 13 repayment plan. We construct a quantitative equilibrium model of the mortgage and unsecured credit markets to assess the impact of this reform on the severity of the housing crisis during the Great Recession. We find that while this reform increased the relative attractiveness of mortgage default, its impact on the housing market during the crisis was largely mitigated by general equilibrium effects on mortgage lending standards. Allowing bankruptcy judges to reduce mortgage principal for underwater homeowners through a policy of cramdown would have had only a small impact on the mortgage default rate during the crisis.
Author: Matthew N. Luzzetti Publisher: ISBN: Category : Languages : en Pages : 47
Book Description
Reforms made to the U.S. Bankruptcy Code in 2005 instituted a new means testing requirement that restricts the discharge of unsecured debt under Chapter 7 to filers with income below their state's median, thereby forcing filers with income above their state's median into a costly Chapter 13 repayment plan. We construct a quantitative equilibrium model of the mortgage and unsecured credit markets to assess the impact of this reform on the severity of the housing crisis during the Great Recession. We find that while this reform increased the relative attractiveness of mortgage default, its impact on the housing market during the crisis was largely mitigated by general equilibrium effects on mortgage lending standards. Allowing bankruptcy judges to reduce mortgage principal for underwater homeowners through a policy of cramdown would have had only a small impact on the mortgage default rate during the crisis.
Author: Eric A. Posner Publisher: ISBN: Category : Bankruptcy Languages : en Pages : 22
Book Description
The housing crisis threatens to destroy hundreds of billions of dollars of value by causing homeowners with negative equity to walk away from their houses. A house in foreclosure is worth 30 to 50 percent less than a house that a homeowner either retains or sells on the market, and a foreclosed house damages neighboring property values as well. We advocate a reform of Chapter 13 that would allow homeowners to strip down the value of their mortgages in a prepackaged bankruptcy. Such a plan would give homeowners an incentive to keep or resell their homes, thus reducing the market value loss of homes while protecting the effective value of creditors' interests. Two further key elements of the plan are that it uses prices based on the average house price in a particular ZIP code, which reduces moral hazard; and it is automated, requiring only a rubber stamp by a bankruptcy judge or other official, thus preserving judicial resources. Other plans, including that of the Obama administration, are compared.
Author: United States. Congress. Senate. Committee on the Judiciary. Subcommittee on Administrative Oversight and the Courts Publisher: ISBN: Category : Business & Economics Languages : en Pages : 152
Author: Bebe Stokes Publisher: Xulon Press ISBN: 1622303997 Category : Business & Economics Languages : en Pages : 146
Book Description
"If you are 'upside down' and/or facing foreclosure of your home, life can seem like a runaway train careening toward disaster. During the process of completing this book, I noticed the laws are changing rapidly. But real options are open to you-and it's time you knew them......
Author: Martin Neil Baily Publisher: Brookings Institution Press ISBN: 0815725256 Category : Business & Economics Languages : en Pages : 191
Book Description
A Brookings Institution Press and Nomura Institute of Capital Markets Research publication The financial crisis of 2007–08 and the Great Recession caused more widespread economic trauma than any event since the Great Depression. With a slow and uneven recovery, encouraging stability and growth is critical. Financial Restructuring to Sustain Recovery maintains that while each part of the financial services industry can play a useful role in revving up the U.S. economic engine to full capacity, the necessary reforms are sometimes subtle and often difficult to implement. Editors Martin Neil Baily, Richard Herring, and Yuta Seki and their coauthors break recovery down by three areas: Restructuring the housing finance market Reforming the bankruptcy process Reenergizing the market for initial public offerings Included are lessons drawn from Japan's experience in overcoming its long-lasting financial crisis after the collapse of its real estate market in the 1990s. Contributors: Franklin Allen (Wharton School, University of Pennsylvania), James R. Barth (Auburn University College of Business; Milken Institute), Thomas Jackson (Simon School of Business, University of Rochester), Jay R. Ritter (Warrington College of Business, University of Florida), David Skeel (University of Pennsylvania Law School), and Glenn Yago (Milken Institute).
Author: Nina Liao Publisher: ISBN: Category : Languages : en Pages : 39
Book Description
The U.S. bankruptcy system has served as a safety net for millions of Americans for the last 110 years, but it is failing to prevent foreclosures today. Amid angry investors pointing fingers at Wall Street and nervous federal officials answering to allegations, economists and bankruptcy judges debate the controversial modification of loans, a process called cram-down. Cram-down is a feature of bankruptcy law that permits a debtor to pay a creditor the value of the collateral instead of the full value of the loan. Under current law, judges can modify mortgages on vacation or second homes. Oddly, the Bankruptcy Code creates an exception for mortgages secured solely by the debtor's primary residence. For millions of distressed homeowners, this exception forces them to pay their mortgages in full despite sharply declining home values. Proponents of cram-down advocate for the elimination of this exception, but opponents warn that changing the status quo could exacerbate the housing crisis.Although keeping the current law is unacceptable, cramming down all undersecured mortgages is too risky because it can reduce access to credit and obstruct homeownership. Congress needs a unique two-part strategy that can adequately relieve Chapter 13 debtors affected by the recession while creating a sustainable bankruptcy system. First, Congress should pass a temporary cram-down relief measure. It should then implement a permanent system that relies on judicial discretion to modify loans consistent with jurisdictional Chapter 13 practices and needs. Based on the established means test of the 2005 Amendments, the temporary measure should provide relief quickly to distressed homeowners in Chapter 13, particularly victims of predatory lending. The relief measure should sunset, however, to account for unforeseeable consequences of cram-down. The permanent system will differ in that, while judges can continue to modify loans, they must treat cram down as a last resort and carefully pursue an objective inquiry. If designed and monitored carefully, cram-down can be a win-win proposition.
Author: Donald P. Morgan Publisher: DIANE Publishing ISBN: 1437929818 Category : Law Languages : en Pages : 30
Book Description
The 2005 Bankruptcy Abuse Reform (BAR) act contributed to the surge in subprime foreclosures that followed its passage. Before BAR, over-indebted mortgagors could free up income to pay the mortgage by filing bankruptcy and having their unsecured debts discharged. BAR blocks that maneuver for better-off filers by way of a means test. Identifies the effects of BAR using state home equity bankruptcy exemptions; filers in low-exemption states were not very protected before BAR, so they would be less affected by the reform. Regressions confirm four predictions implied by that identification strategy. Adds to research trying to explain the surge in subprime foreclosures and to a broader literature on household bankruptcy demand and credit supply. Illustrations.
Author: United States. Congress. House. Committee on the Judiciary. Subcommittee on Commercial and Administrative Law Publisher: ISBN: Category : Business & Economics Languages : en Pages : 348
Author: United States. Congress. House. Committee on Oversight and Government Reform. Subcommittee on Domestic Policy Publisher: ISBN: Category : Business & Economics Languages : en Pages : 192
Author: United States. Congress. Senate. Committee on the Judiciary. Subcommittee on Administrative Oversight and the Courts Publisher: ISBN: Category : Law Languages : en Pages : 248
Author: Matthew N. Luzzetti
Author: Matthew N. Luzzetti
Author: Eric A. Posner
Author: United States. Congress. Senate. Committee on the Judiciary. Subcommittee on Administrative Oversight and the Courts
Author: Bebe Stokes
Author: Martin Neil Baily
Author: Nina Liao
Author: Donald P. Morgan
Author: United States. Congress. House. Committee on the Judiciary. Subcommittee on Commercial and Administrative Law
Author: United States. Congress. House. Committee on Oversight and Government Reform. Subcommittee on Domestic Policy
Author: United States. Congress. Senate. Committee on the Judiciary. Subcommittee on Administrative Oversight and the Courts