Some thoughts on the mortgage crisis and “cram downs,” from Megan McArdle.
There seems to be a push on by the left to completely destroy crucial Anglosphere institutions, including contract law, without which we would never have built the wealthiest nation in history. How easy or cheap do you think that it will be to get a mortgage when the lenders realize that their contracts can be whimsically rewritten by an unaccountable judge?
I just tried to refi from a bank that took a huge bailout. I wanted to lower my mortgage interest rate on a fixed rate 30 year loan that was with this same institution for the last ten years. I have a credit scores well over 800, $300,000 income, and the refi was for a loan half the value of the house. I was rejected. The reason they gave me was they “couldn’t prove I lived here”. The best part? The rejection letter was mailed here…
Banks have gone both stupid and crazy. It is a bad combination.
The left will redefine home ownership as a positive right. Hey, just because somebody can’t afford it doesn’t mean they shouldn’t have it. Just like all the latest and greatest medical care …
Refi, you wrote:
I have a credit scores well over 800, $300,000 income, and the refi was for a loan half the value of the house.
[…]
Banks have gone both stupid and crazy. It is a bad combination.
Just a quick question here. What’s the incentive for the bank here? You’re a good risk. No reason *yet* on their part to refinance. My bet is that they won’t play ball unless you threaten to move your loan to some other bank.
I agree there’s a moral obligation to repay if at all possible. And under any normal market I would never require cramdowns. I am a Common Law man, Anglosphere by descent and opinion.
But a systemic, nation-wide cramdown that reset prices in the housing market to pre-bubble levels might help us reach a market clearing price faster and more efficiently than foreclosing on 10% of the population. It may be practical in a one-off manner, as long as everyone understands it’s “Now or never, and never again.”
Brock,
Except that “never again” never really seems to be “never again.”
Agree with Rick here. It’ll happen again.
Somehow “never again” always seems to translate to “it set the precedent.”
“How easy or cheap do you think that it will be to get a mortgage when the lenders realize that their contracts can be whimsically rewritten by an unaccountable judge?”
prior to 2005, Cramdowns were part of the Bankruptcy
law.
All this really is doing is starting the return to status
quo ante.
If the people in question were in bankruptcy, you might have a point, “jack lee.” But since they don’t, you don’t, and you are as clueless as usual.
Rand,
If the people in question were in bankruptcy, you might have a point, “jack lee.”
You do realized the bill explicily applies to Chapter 13 bankruptcy filings – which require a five year repayment plan with a dedicated 25% of income stream. And that bankruptcy judges already have had the power to change contracts on just about anything but the primary residence for thirty years without the destruction of the Anglosphere?
Cheers.
You do realized the bill explicily applies to Chapter 13 bankruptcy filings – which require a five year repayment plan with a dedicated 25% of income stream.
No, I don’t realize that.