Wednesday, December 12, 2007

House Panel Approves Bankruptcy Bill Cramdown for CH 13

House lawmakers on Wednesday advanced legislation that would enable homeowners to shrink their mortgages in bankruptcy court.

The bill ... was passed by the House Judiciary Committee 17 to 15 ...

House leaders appeared unlikely to bring the bill up for a vote before year-end. ...

Mortgage-industry leaders argue that giving judges this power, which they term a "cramdown," would force lenders to charge higher rates to offset any unpaid loan balances that would be reduced in court.

See also Calculated Risk post

Sunday, December 09, 2007

No Assignment = No Relief From Stay & Lender Can Lose Secured Position if Bankrupcty filed before Assignment!

Looks like the Bankruptcy Courts in San Diego are challenging parties far removed from the original mortgage to provide actual proof that they own the mortgage, and have standing to engage with the homeowners.

Kenneth Andrews, a California attorney who also runs the blog San Diego Predatory Lending, explains:
"One of our lawyers was sitting in court waiting on a hearing and heard what happened. This was a relief from stay motion. Something the lender has to do to proceed on a bk. The motion was unopposed meaning the debtor did not defend it. THE JUDGE DID THIS ON HER OWN!!!!. The lawyers fell off the bench when they heard it.

We are now going to oppose every relief from stay if the names on the mortgages don’t match the parities filing in court. Same as the Boyko case in Ohio but in an NON-Judicial foreclosure state.

EVEN BIGGER though is that if the lender has not perfected their lien when the bk is filed, we can avoid it. Meaning they lose their security and stand in line with the rest of the unsecured creditors. The debtors get a 75k homestead that stands in front of the now unsecured lender.

This is a huge problem for securitized mortgages."

Friday, December 07, 2007

Why the Fed Can't Solve the Liquidity. let alone, the Insolvency Crisis

Source: (Hat Tip to Immobilienblasen) Edited Abstract: You may have seen this chart before. Central banks can only affect the bottom two parts of the chart, high powered money and M3. M3 the Federal Reserve is growing as fast as it can in order to indirectly support the much larger problem of securitized debt and derivatives but risking a return of inflation pushing long term yields up and bond prices down.

These two phenomenal pockets of debt are supported by asset prices: when asset prices (which act as collateral) decline, the credit market contracts & liquidity gets sucked out of the system. So the purpose of pumping new money into the system is to keep nominal asset prices up to protect collateral values of the real problem of leverage in the system that the Fed cannot directly control. It takes more and more money & the creation of new debt to do this because people are having huge problems servicing the debt they already have.

So we have two huge forces fighting each other right now: central banks desperately attempting to re-flate (increasing the money supply & giving lenders fresh cash to create more debt) and the market grudgingly but purposefully attempting to deflate by paying back (which the bureaucrats are trying to help with) or more likely destroying (write-offs) that debt. We have extremely high volatility as these two forces fight it out.

Looking at the chart, which do you think will win? The Federal Reserve or the contracting credit market.