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Frank Threatens Changes to Bankruptcy   December 8th, 2008
Rep. Frank wants bankruptcy judges to be allowed to change terms of mortgages       


More observations...

Representative Barney Frank said today that if foreclosures don't slow down by early next year, he expects his fellow lawmakers to revisit the idea of allowing bankruptcy judges to alter the terms of the mortgages of those facing bankruptcy. This despite the fact that earlier today an article documented the fact that more than half of those that have the terms of their mortgages altered end up defaulting again.


House Financial Services Committee Chairman Barney Frank on Monday said that if foreclosures are not on the decline early next year he expects lawmakers to revive efforts to change bankruptcy law and let judges adjust the terms of mortgages. "If we come back in February and there is frustration that efforts at reducing foreclosure are not working, we can do bankruptcy law changes to get at the problem," Frank told participants in an Office of Thrift Supervision conference.

It's amazing to see such an article just hours after I commented on the fact that more than half of the borrowers who have their mortgages adjusted to be more "affordable" just end up defaulting on the more affordable version of their mortgage.

We've basically been given evidence today that altering the terms of a troubled mortgage doesn't usually fix the problem. Yet this same day Democratic Representative Barney Frank suggests we expand a failed policy by giving bankruptcy judges the authority to use the policy for those that are least likely to be able to comply even with the improved terms of the mortgage.

As I said in my earlier comment, we're avoiding the cold hard facts of reality. Many homeowners simply can't afford to own a home. It's really that simple. We got into this crisis, in large part, by trying to get unqualified persons into homes they could not afford. We're not going to resolve this crisis by trying to keep those unqualified persons in homes they still can't afford.

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