A special chapter of bankruptcy should be created to fix the mortgage crisis and hasten a housing recovery, while protecting borrowers and investors alike. Regulators would identify an affordable total debt-to-income ratio for overburdened borrowers. Qualified individuals could then file for this special bankruptcy by presenting all their debts—mortgages, credit-card bills, car loans, and the like—to a court (or an arbitrator). No debts would be excluded, so the borrower's entire balance sheet could be addressed.Link. This is, of course, with some tweaking, exactly what the Bankruptcy Court does today. Evidently nobody at Blackrock or the Journal has ever heard of Chapter 13?
The court would then rank those debts so that a borrower's debt would be reduced or eliminated in order of seniority. If the court and the borrower could not settle on a sustainable payment plan, then foreclosure and liquidation proceedings could commence.
To relieve banks from having to absorb all the losses associated with borrowers' bankruptcy plans at once, regulators could allow losses on home-equity loans and credit cards to be spread over an extended period. They might also include a "sunset clause" so that these special bankruptcy rules expire once the mortgage crisis is resolved.
Monday, October 18, 2010
We've Got This Great New Device Called "The Wheel"
The Wichita Bureau catches the WSJ (and a BlackRock partner) in a piece of inspired fatuity: