Ryan Grim does yeoman's work tracking down Democratic senators who voted against yesterday's cramdown legislation. The bill, had it not been defeated, would have allowed bankruptcy judges to modify home loans so that borrowers could continue to make payments and avoid foreclosure. What was the reasoning against the bill?
"I've not supported the cramdown for a variety of reasons, not the least of which is that I hate to see that authority to determine what the future contract is ceded to the court." -- Ben Nelson
Huh. Since primary home loans are the only loans that a bankruptcy judge can't change (he or she can modify loans for second homes, cars, boats, etc.), I'm sure we can look forward to Nelson's bankruptcy reform package to prevent courts from modifying any loans, and in the process eliminate the main reason for bankruptcy court.
"One of the reasons why usually mortgage rates are cheaper for primary homes is that the markets have the certainty that the judge won't be invited to come in and change the terms of the mortgage." -- Tom Carper
But, as we've covered extensively, there is no empirical evidence that mortgage rates would rise due to this legislation; in fact, that it was limited to a very specific pool of loans suggested it would have had a negligible affect on the broader mortgage market.
"I just think a deal's a deal. I have a lot of empathy for folks who tend to get led astray, but I just think it's going to create some problems -- pretty obvious, actually. I don't have to list them. I'm generally opposed. I don't think it works well." -- Jon Tester
Actually, Senator, there aren't really obvious problems with the bill. You may not feel you have to tell the press about why you vote for a bill, but I imagine your constituents will be wondering.
It's worth noting that Evan Bayh, regular antagonist of the left, actually voted "yes" on cramdown. I doubt he was a positive force in the negotiations surrounding the bill, but he deserves some grudging credit for voting the right way. But now that this legislation has failed, there will be significant questions about the efficacy of Obama's Making Home Affordable plan, which in many ways depended on bankruptcy modification as a stick to force mortgage lenders and investors to follow the administration's guidelines. But the defeat of this legislation is a step backward, and it's too bad that the administration did so little to push it forward.
-- Tim Fernholz
