I may be a bit out of touch, after all it has been nearly ten years since I went through a bankruptcy, but Biden’s comments regarding bankruptcy and mortgage lenders through me for a loop.He said, and I am paraphrasing, “I not only want to give bankruptcy courts the power to force lenders to lower the interest rates for those who can’t pay their mortgages, but I want them to have the power to lower the principle as well.” Of course his point is to make sure that nobody ever gets evicted or lose their home simply because they can’t pay for it.
This is a very dangerous policy. Where in the US Constitution does it give government the right to force a lender to absorb all the costs of doing business? Where in the US Constitution does it give the government the power to force a lender to ‘take a loss’ on a loan simply because the borrower couldn’t pay? Give bankruptcy courts the power to force banks to lower the principle on a defaulted loan? Tell banks that $300,000 mortgage is now only a $200,000 or a $150,000 mortgage? Is he crazy?
His policy would not only put an end to foreclosures, which is what he wants, it will kill the housing market for the middle class. When a borrower takes out a mortgage the house becomes the collateral for the loan. If you don’t pay, the bank takes the house. If the house can no longer be used as collateral, what incentive does a lender have to make the loan in the first place? How in the world can he believe this will help the American people?
How many mortgage lenders will refuse to give mortgages to anyone except the wealthy? How many homeowners will refuse to pay that $300,000 mortgage, knowing the government will make it impossible for them to be evicted and force the bank to lower the principle, possibly by half? Maybe I’ve got it wrong. Maybe I’m out of touch. Maybe somebody smarter than me at RedState could explain it to me. And hurry before I mail my mortgage payment.