Consumer Law & Policy Blog

More on Taxes After Foreclosure

Credit Slips has this interesting follow-up to yesterday's New York Times article regarding the federal tax bite after foreclosure.  Jeff Sovern blogged yesterday about the New York Times article.

A Solution to the Problems Caused by Securitization?

Last week I posted a link to and some quotes from an article in the Times about the problems caused in unwinding securitized loans.  Today's Times has a column by regular op-ed columnist and Princeton economist Paul Krugman, "Workouts, Not Bailouts," in which Krugman proposes a solution to the problem.  A quote:

This looks to me like a clear case for government intervention: there’s a serious market failure, and fixing that failure could greatly help thousands, maybe hundreds of thousands, of Americans. The federal government shouldn’t be providing bailouts, but it should be helping to arrange workouts.

And we’ve done this sort of thing before — for third-world countries, not for U.S. citizens. * * *

The mechanics of a domestic version would need a lot of work, from lawyers as well as financial experts. My guess is that it would involve federal agencies buying mortgages — not the securities conjured up from these mortgages, but the original loans — at a steep discount, then renegotiating the terms. But I’m happy to listen to better ideas.

Washington Post: "Maxed Out" Prescient About Mortgage Loan Market

Today's Washington Post explains in this short article that although the movie "Maxed Out," directed by James Scurlock (pictured to the left), received only a modest reception when it hit movie theaters in March, it was "right on the money" in depicting the country's debt crisis, as evidenced by recent troubles in the subprime loan market.  The CP&L blog has discussed "Maxed Out" on several occasions, including here and here.

Times Articles on Securitization Woes and Lead Trinkets

Yesterday's Times had two front-page articles on consumer issues.  The first article, "More Home Foreclosures Loom as Owners Face Mortgage Maze,"reported on the difficulties consumers have in restructuring mortgages in the era of securitization.  Two quotes, which in turn include quotes from familiar names: 

“Securitization led to this explosion of bad loans, and now it is harder to unwind and modify them even where it is in the best interests of both the borrower and the investors,” Kurt Eggert, an associate professor at the Chapman University School of Law in Orange, Calif., said in an interview. “The thing that caused the problem is making it harder to solve the problem.”

* * *

Ira Rheingold, executive director of the National Association of Consumer Advocates, says companies in the chain should be held responsible. “Because Wall Street is responsible for the mess we are in, they need to bear some of that burden,” Mr. Rheingold said. “Why should people who have been funding these bad loans get a free pass?”

The second article, "Bid to Root Out Lead Trinkets Falters in U.S.", states that " hundreds of thousands of tainted items are still being sold across the United States, the federal government has found."   

Washington Post Editorializes In Favor Of Limits On Payday Lending

Check out this editorial in today's Washington Post in favor of state-law limits on payday lenders.  The editorial specifically endorses efforts in the District of Columbia Council to limit interest rates on payday lenders in the District.

Response to FTC Report on Relationship Between Credit Scores and Insurance Claims

We blogged yesterday on the FTC's report that found that (relatively low) consumer credit scores are predictors of auto insurance claims.  PIRG's consumer blog claims here, however, that the FTC study is flawed.  The PIRG post provides links to a major June 2007 National Consumer Law Center report on the topic and information on a congressional hearing to held tomorrow (Friday July 27).  The hearing is entitled "Credit-Based Insurance Scores: Are They Fair?"

FTC Releases Report on Effects of Credit-Based Insurance Scores

The FTC put out a news release yesterday on credit scores and auto insurance:

The Federal Trade Commission today released a report presenting the results of a study concerning credit-based insurance scores and automobile insurance. The study found that these scores are effective predictors of the claims that consumers will file.

Visit the FTC's website to read the remainder of the release.

Elizabeth Warren on the Relationship Between Our Broken Health Care System and Personal Bankruptcy

Professor Elizabeth Warren testified last week before the Judiciary Committee of the U.S. House of Representatives on the tragic relationship between our failing health care system and the rise in personal bankruptcies.  As Prof. Warren puts it:  "Since 2000, an estimated five million families have filed for bankruptcy in the aftermath of serious medical problems. The current health care finance system is bankrupting hard-working, play-by-the-rules American families."  Prof. Warren's testimony, as well as materials related to her proposal to create a Financial Product Safety Commission to protect consumers against risky financial products, can be found at this entry on the Harvard Law School website.  For more on the relationship between illness/injury and bankruptcy, see this empirical study in the journal Health Affairs by Warren, David Himmelstein, Steffie Woolhandler, and Deborah Thorne.
 

"Maxed Out" Now Available for Purchase or Rental

We have previously discussed the critically-acclaimed movie "Maxed Out" here and here.  "Maxed Out" surveys the state of consumer debt in this country in a way that you won't easily forget.  It is now available for purchase for $15 to $20 from folks like Amazon and for rental from the usual mega-renters like Neflix and Blockbuster.  Worth viewing.

NCLC Reports on Big Name Banks' Support of Payday Lenders

Over at the Consumerist you'll find this nice discussion of a new National Consumer Law Center report on the relationship between some of the biggest banks and your friendly local payday lender.  Yes, Bank of America, Wells Fargo, JP Morgan, and others are bankrolling the payday lending industry to the tune of hundreds of millions of dollars in lines of credit. (But they don't sell payday loans at their local branch banks, do they?).  The Consumerist characterizes what it learned from NCLC's report this way:  "Kinda like finding out the local hardware store owner sells crack on the side."