Igor is right again this is loony.

I dunno..

1) it doesnt use taxpayer money
2) only a tiny percentage of people facing foreclosure are affected
3) it lets the people in charge feel like they’re accomplishing something, which prevents them from attempting other things

Since no one in charge will do the “right” thing and let prices go down to where they should (as if they can stop it anyway), maybe we count this as the closest thing to a win as we can get?

Fact is, bankruptcy courts are very well equipped to deal with cram downs, values and making sure that consumers can afford the payments on the modified loans.

I don’t disagree with you on that point, and you’ll note that I concede that this may benefit individual borrowers. My issue is that what’s good for the goose may not be good for the flock. [Yeah, I just made that one up.]

It’s tough enough for experienced appraisers to evaluate home values these days- I really doubt judges will do better. Here’s one of my concerns. Let’s suppose a realtor bought a house with a $500K mortgage back when the market was flying high. Now that the market is down, the realtor can only afford a $90K mortgage, but comparable homes in the neighborhood are now worth $375K. Should a judge really be allowed to drop the mortgage down to $90K to keep this guy in his house? Then there’s the question of how doing this benefits the greater market. What possible benefit could this be to anyone other than this particular borrower?

Again, I haven’t seen hard numbers, but when I made a cursory search of a couple of sources, it looks like only a small percentage of people facing foreclosure are declaring bankruptcy. Even if this legislation passes, it will do virtually nothing to “save” the housing market, and like other bailouts being considered, will do more harm than good.

Fact is, bankruptcy courts are very well equipped to deal with cram downs, values and making sure that consumers can afford the payments on the modified loans. If they can’t afford it, their plan cannot be confirmed. I suggest you look deep into the requirements of filing a Chapter 13 case today and you will see that their is more fiction than fact in your piece.

That bothers me as well.

The government seems determined to make sure that we have a way of borrowing money to keep the economy going. To do that we need collateral and high home values. We need the banks to not unwind their leverage. This is simply not sustainable.

In a world where housing is inexpensive, Americans can rediscover disposable income. We can save to buy things and run off of cash flow rather than our HELOCs. Granted we won’t be spending at the rate we did in the heady days of the housing insanity, but it’s a more sustainable business model.

I agree with Peter Schiff- let the home prices fall. It’s a painful, but necessary, step to recovery.

The main thing that bothers me about the rhetoric I hear is this spiel about how we must maintain house prices. The fundamentals do not support that.