Comments on: The banks change their tune on mortgage cramdowns. It's about time

By: Barbara Kiviat

Barbara Kiviat — Fri, 09 Jan 2009 22:46:14 +0000

@felixsalmon: Point taken. Back to you, sir: http://curiouscapitalist.blogs.time.com/2009/01/09/citigroup-and-dick-durbin-rewrite-bankruptcy-law%E2%80%94but-wont-the-investors-be-mad/. I considered titling the post "In which Barbara establishes that she is the man and Justin just a pig," but I thought that someone somewhere might somehow read that in a way other than intended.

By: dadfox

dadfox — Fri, 09 Jan 2009 18:06:59 +0000

If mortgage brokers analyzed the situation properly they might well do a cramdown before foreclosure. I know some are doing just that.

By: felixsalmon

felixsalmon — Fri, 09 Jan 2009 15:43:08 +0000

Barbara, Justin's the pig. IIRC, the men didn't change much, only the pigs did. Justin's stealing your thunder, I tell you!

By: plukasiak

plukasiak — Fri, 09 Jan 2009 13:17:15 +0000

tomlind...
the Levitin and Goodman study (available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1087816) you are referring to uses two different perspectives to reinforce the conclusion that mortgage rates are "indifferent to bankruptcy modification risk, including strip-down."
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The first perspective is "current". It extrapolates the indifference based on the fact that there is no significant difference in the treatment by lenders of different classes of residential real estate -- single family principle residence mortgages cannot be modified in chapter 13 filings, but mortgages on second homes, and in multi-family dwellings in which the owner has his/her principle residence, can be modified.
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The second perspective (beginning on page 16 of the study) presents the "historical" data and finds that historically, it made no difference in mortgage rates/fees whether first mortgages could be modified or not prior.
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The second perspective is much easier to explain in a magazine article, which is probably why Justin cites it.
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(IMHO, the study is flawed because during the period studied all those entering bankruptcy had a choice between Chapter 7 and Chapter 13 filing -- and the availability of Chapter 7 probably mooted the issue of "risk premiums".)

By: Barbara Kiviat

Barbara Kiviat — Fri, 09 Jan 2009 13:11:20 +0000

@felixsalmon: In this metaphor, am I the pig, or is Justin? I should have more to say about this--mortgage rewrites, not Felix's exquisite taste in literature--later today.

By: tomlind

tomlind — Fri, 09 Jan 2009 05:40:54 +0000

If the cramdown bill is such good policy why is it limited to only existing mortgages? As for the lawyers' comments, they seem to be backed up by no data and in fact compare pre-1993 data to post-1993 data. Those two periods were characterized by vastly different mortgage markets. Here is what I wrote this evening and it contains direction to other thoughts. http://www.butthenwhat.com/?p=905

By: felixsalmon

felixsalmon — Fri, 09 Jan 2009 02:55:00 +0000

The creatures outside looked from Justin to Barbara, and from Barbara to Justin, and from Justin to Barbara again; but already it was impossible to say which was which.

By: plukasiak

plukasiak — Thu, 08 Jan 2009 22:41:03 +0000

call me a cynic, but Citi's willingness to give judges leeway on mortgages may be motivated by a desire to see no changes made in how credit card debt is handled by bankruptcy judges. Citi is one of the largest issuers of credit card debt (if not the largest), and I suspect that their ability to issue bonds based on credit card receivables would be severely impaired if we returned to the status quo ante that existed before the Biden Bankruptcy debacle passed.