Will Obama reform bankruptcy laws to stop foreclosures?
By Chip Parker, Jacksonville Consumer Attorney on Nov 6, 2008 in Mortgage Issues In Bankruptcy
Past Democratic spoiler and recent fringe presidential candidate Ralph Nader suggested President Elect Barack Obama might be a corporate Uncle Tom. Nader is an irrelevant jerk whose fifteen minutes of fame has long expired, and his racial remark on a night of historic proportions was a sad attempt to cling to the spotlight.
However, the point behind Mr. Nader’s comment should be examined. The Democrats are supposed to be the party of the middle class, and they are in complete control of the two branches necessary to pass legislation to help ailing Main Street. So, the big question is will they?
The middle class is being foreclosed out of home ownership at a rate of 10,000 per day, and Florida is one of those states particularly hurt by this housing crisis. On his website, Barack Obama states, “Obama and Biden will work to eliminate the provision that prevents bankruptcy courts from modifying an individual’s mortgage payments. They believe that the subprime mortgage industry, which has engaged in dangerous and sometimes unscrupulous business practices, should not be shielded by outdated federal law.”
Obama outlined his plan for fixing the foreclosure crisis on the campaign trail, but bankruptcy reform was conspicuously absent from his talking points. Of all the options available, bankruptcy reform makes the most sense, and it is extremely popular among the voters that put him and a bunch of Democratic politicians in power Tuesday night.
Only banks are opposed to bankruptcy reform, and that’s because they are too myopic to realize it would benefit them as well. A recent study by Georgetown Law Professor Adam J. Levitin concludes that rewriting a home mortgage for the current fair market value at a fix rate of interest costs the banks half of as much as a taking the home in a foreclosure.
Will Obama crawl into the cool silk pocket of the mortgage industry, or will he keep his promise to the people that gave him the White House?
The banks had their chance to do the right thing, but they went wild in the darkness of deregulation. Ralph Nader’s question is a fair one, but not the way it was asked.
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