New Analysis Says ‘Cramdown’ Will Prevent 20 Percent of Foreclosures
As Democrats in both Congress and the White House appear willing to wait a few more weeks (or months?) to tackle legislation that would allow bankruptcy judges to renegotiate troubled mortgages, Credit Suisse released a report today estimating the practical effects of this decision. From the report:
We expect the bankruptcy plan will provide about a 20% reduction in foreclosures. This is based on our belief that many delinquent loans are too far underwater relative to borrowers’ income, many properties are empty, and many borrowers wouldn’t want to go through the onerous bankruptcy process.
The Center for Responsible Lending estimates that more than 6,000 homes will be foreclosed for every day of 2009. So for each day the Democrats delay, by these numbers, 1,200 folks could have saved their homes.
Why the delay? It seems that, despite calls from some Democrats to stick the bankruptcy language into the economic stimulus bill, the Obama administration wants as many GOP votes as it can muster, to show that Washington has turned the page on partisan bickering. It’s a noble goal, particularly in the wake of a Bush administration that lived for partisan bickering.
Still, Republicans look poised to oppose the stimulus bill even without the bankruptcy provision. Even if that weren’t the case, one wonders if the show of bipartisan love is worth the number of foreclosures that might have been prevented.