Bankruptcy reform contributed to mortgage crisis! Info from the Fed & Link

[TwixVoy]

VERY interesting:

http://www.newyorkfed.org/research/staff_reports/sr358.html


"We argue that the 2005 bankruptcy abuse reform (BAR) contributed to the surge in subprime foreclosures that followed its passage. Before BAR, distressed mortgagors could free up income by filing bankruptcy and having their unsecured debts discharged. BAR blocks that maneuver for better-off filers by way of a means test. We identify the effects of BAR using state home equity bankruptcy exemptions; filers in low-exemption states were not very protected before BAR, so they would be less affected by the reform. Difference-in-difference regressions confirm four predictions implied by that identification strategy. Our findings add to research trying to explain the surge in subprime foreclosures and to a broader literature on household bankruptcy demand and credit supply."

[glowing]

1. Greed brings it all down.

[sandnsea]

2. Well hello

They just do not understand the way regular people live. Everything is just a number on a balance sheet to them. They don't understand $300 a month pays a power bill or an insurance payment. There wasn't anyplace for that reset mortgage money to come from, and duh, if they couldn't get rid of debt any other way they would have to walk away from their homes.