Biden: Allow restructuring of principle on loans

[Aggie Hoopsfan]

I feel like this warrants its own discussion outside of the VP debate blog. Is he serious? I am all for bankruptcy judges being able to rework the rates on loans, but giving them free reign on adjusting the principles on loans to banks?

Haven't we been hearing all week about the credit and loan market freeing up? What the hell does Biden think is going to happen as far as the liquidity in the credit markets go if banks know that they could give someone a loan for an amount and then some judge could come along later and say "sorry, you're only going to get half that"?

[ducks]

Well, mortgage-holders didn't pay the price. Only 10 percent of the people who are -- have been affected by this whole switch from Chapter 7 to Chapter 13 -- it gets complicated.

But the point of this -- Barack Obama saw the glass as half- empty. I saw it as half-full. We disagreed on that, and 85 senators voted one way, and 15 voted the other way.

But here's the deal. Barack Obama pointed out two years ago that there was a subprime mortgage crisis and wrote to the secretary of Treasury. And he said, "You'd better get on the stick here. You'd better look at it."

John McCain said as early as last December, quote -- I'm paraphrasing -- "I'm surprised about this subprime mortgage crisis," number one.

Number two, with regard to bankruptcy now, Gwen, what we should be doing now -- and Barack Obama and I support it -- we should be allowing bankruptcy courts to be able to re-adjust not just the interest rate you're paying on your mortgage to be able to stay in your home, but be able to adjust the principal that you owe, the principal that you owe.

That would keep people in their homes, actually help banks by keeping it from going under. But John McCain, as I understand it -- I'm not sure of this, but I believe John McCain and the governor don't support that.

There are ways to help people now. And there -- ways that we're offering are not being supported by -- by the Bush administration nor do I believe by John McCain and Gov. Palin.
http://www.cnn.com/2008/POLITICS/10/02/debate.transcript/index.html

[T Park]

I feel like this warrants its own discussion outside of the VP debate blog. Is he serious? I am all for bankruptcy judges being able to rework the rates on loans, but giving them free reign on adjusting the principles on loans to banks?

Haven't we been hearing all week about the credit and loan market freeing up? What the hell does Biden think is going to happen as far as the liquidity in the credit markets go if banks know that they could give someone a loan for an amount and then some judge could come along later and say "sorry, you're only going to get half that"?



If only he had a funny accent, long hair, breasts and had kids then people would rip him for it.

[Aggie Hoopsfan]

Obama campaign:

"so what if you're poor. Go take out a mortgage loan for a million dollar home. Then default in 3 months, and we'll back the idea that when you go to bankruptcy court you can get the judge to write that balance down from 999K and change to $50. You deserve to have a big home, it sez so in the Constitution!"

[Anti.Hero]

This country is going to be so back asswards it's going to be hard to figure out how to make an honest buck.


Purchasing foreclosed homes under value will probably be a form of discrimination in 3 years.

[fyatuk]

My response to that was "bullshit". I have no problems with allowing bankruptcy courts to adjust rates, or even length of term left, but to be able to adjust the actual value of debt is bogus.

[ducks]

especially on a house loan
!

[Aggie Hoopsfan]

My response to that was "bullshit". I have no problems with allowing bankruptcy courts to adjust rates, or even length of term left, but to be able to adjust the actual value of debt is bogus.

Funny, no liberal responses in this thread...

Anyway, I'm a fiscal conservative, but I've got no problems with bankruptcy courts adjusting the rates on loans, but the principle is what it is. Grant the ability to alter that, and our lending and credit markets collapse entirely.

I was actually hoping that Palin would have gone a step further in her comments about this and said they need to repeal the law change, but understand why she didn't.

But fuck Obama/Biden for even suggesting this.

[ChuckD]

Banks themselves are already adjusting principal in the form of short sales. I think they'd rather do just about anything rather than be stuck with millions more repo houses. If they go through the entire process of repo and evict, they're going to get fucked anyway. They will only get current market, AND they'll probably have to pay big bucks to fix vandalism as it sits empty for a while in the queue. They'll have a tough time coming up with the $$$ to fix up all those houses in this tight credit market.

[Clandestino]

the people who won't pay their 100k mortgage wont pay a 50k mortgage either. it's just postponing the inevitable

[spurster]

I think the idea is to let bankruptcy courts the flexibility to deal with all the debts in a fair way. Regarding reducing principle, if the original price was $200K, but now the market is $150K, then reducing the principle some makes sense for both sides. Part of the problem (as I understand it) is that a mortgage might be divided into multiple pieces and put into different packages, so that there was no single holder of the lien, which made it difficult for any reasonable negotiations to take place.