Sub-prime mortgage loan crisis question

[ColbertWatcher]

Does anyone remember the Bankruptcy bill Congress passed in 2005?

Experts were warning that it would hinder individuals, while leaving the law as sweet as ever for corporations.

Correct me if I'm wrong, but isn't this thing (the Bankruptcy bill) coming to a head with this sub-prime mortgage loan crisis?

People wanting to own a home, went to the bank for a loan. The bank provides the loan with the understanding that the bank owns the home until the buyer pays off the loan. The banks then plays stock market with the loans, buying and selling the them like Enron did with electricity and it seems the way oil companies are manipulating the price of gas now too.

Regardless of the price or true ownership (neither of which is known for certain), the people who took out the loans are now unable to pay them off. With so many people unable to pay their loans, the banks (or whoever owns the loan) will have to absorb the losses. If necessary, the corporate entity that owns the loan will have those assets protected by filing for bankruptcy.

The people on the other hand, will lose the home and whatever money they've already invested in the home--without bankruptcy protections since the law has changed. No amount of the loan will be forgiven as before; the loan will still have to paid off in full.

The questions I have that prompted this thread are: on which side of the Bankruptcy Bill were the banks? Who owns all those homes and what could they possibly do with them all?

[Selatius]

1. The bankruptcy bill passed in 2005 by the Repubs dealt more with credit card companies.

It wasn't aimed specifically for banking establishments in home mortgages. The bankruptcy bill simply made it harder for a person to discharge credit card debt. That was the heart of that bill. It simply made it harder to file for people to file for Chapter 7, so they are forced to do Chapter 11 or Chapter 13 bankruptcy instead, although 11 is rare for individuals compared to business entities.

[ColbertWatcher]

3. But that doesn't preclude the banks from using it, too.

So, instead of having more options the new bankruptcy law forces people into fewer options.

[Selatius]

5. That was the point for the credit card industry, but it's complicated matters for banking for the...

same reasons. If a person cannot discharge his credit card debt, he is forced into a weaker hand when dealing with a bank over possible foreclosure. With less cash flow available to service the loan, the individual must ask for even more generous concessions from the bank to avoid foreclosure, and if the bank calculates that they could eat the loss and come out with more money than with giving the concessions, they are going to foreclose on him for basically asking for too much help.

Either way, the bank loses. It's just that the former homeowner loses even more.

[ColbertWatcher]

6. Nothing generous is coming from the banks.

The banks (or whoever owns the loans) will come out of this fine; they still have their asset protections.

Only a real investigation will clean all this up.

[sam sarrha]

2. they obviously saw this coming back then.. but couldn't stop their gambling addiction

one rip off after another.. cause they are gambling addicts and cant stop..

[ColbertWatcher]

4. This is what I suspect as well...

...but #2 is suggesting the law can only be applied narrowly, which I don't agree with. No corporation is going to be shy about exploiting laws for their favor.

[ColbertWatcher]

7. Saturday morning kick. n/t

[AP]

8. I don't think there were many reforms to the chapters corps use (which was 7, no?)

And I don't think corps use chapter 7 in the contexts you describe???

[ColbertWatcher]

9. The corporations lost nothing.

The bankruptcy bill targeted individuals only.