Whoops!

Friday, November 9th, 2007 @ 1:48 pm | Economy, Housing Bubble

Here’s a classic case of “be careful what you wish for“.  Lenders are now getting bitten in the ass for pushing harsh new bankruptcy laws through the Congress.  Since homeowners can’t as easily file Chapter 7 or 11 to get rid of credit card debt they’re being forced into delinquency on their mortgage payments.  Unlike credit cards, a home loan is a secured debt, so the homeowners have the ability to leave the keys on the kitchen table and walk.  The entire goal of the so-called “bankruptcy reforms” was to shield a lender from the risk of over-extending themselves.  With the new laws in place, companies like Chase or Citi could underwrite credit lines to customers they knew couldn’t afford the terms and not have to worry about the consequences.  Talk about a colossal backfire.

-mg

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