18 Aug Did The Republican Congress Cause The Mortgage Market Mess By Passing Bankruptcy Reform?
Chattanooga Tennessee Bankruptcy attorney Ken Rannick thinks so. And he makes a point that the new bankruptcy reform legislation triggered the current mortgage meltdown. How, you ask? Ken says BAPCPA, the Bankruptcy Abuse Prevention and Consumer Protection Act, prohibits debtors from cramming down an overvalued upside down car loan under Section 506, and instead, now requires debtors to continue paying the contract rate. Ken says that takes away $200 to $400 or more of the monthly income that could be used to pay on the mortgage. Ken predicted the mortgage pipeline would fill because of BAPCPA.
It is hard to tell how much impact the number of bankruptcy cases has on the overall mortgage default rate. Perhaps bad mortgages themselves are the cause of bankruptcy and not vice versa. But August events show the mortgage market mess has acquired its own place in history beyond the early problems with subprime lending.

Andy Miofsky, Esq.
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