In incendiary remarks against a CRL study pushing for so-called ‘cram-down’ bankruptcy reform, MBA chairman-elect David Kittle said that the consumer group was misleading policymakers into overreacting on the hotly-contested issue. â€œBy choosing to misread and misinterpret the existing data on subprime loans, officials at the Center for Responsible Lending have again demonstrated they are more interested in advancing their own legislative agenda than in having an honest debate about the real scope of the problem and how to help those most in need,” Kittle said in a press statement released late Monday. The CRL report claims that allowing judicial modification of a mortgage on a borrower’s principal residence during Chapter 13 bankruptcies would help 600,000 borrowers keep their home. Kittle argued that the figure was vastly inflated, since more than 50 percent of borrowers with subprime ARMs reseting in early 2007 refinanced or paid off the loan prior to reset — meaning more than half the loans cited by the CRL as at-risk in its study will never see a reset. “Policymakers should ignore this report as it is more rhetoric than fact,” he said. “Bankruptcy reform is not the answer for consumers having trouble making their mortgage payments. It will drive up the cost of credit in the form of higher rates, larger down payments and greater closing costs.” The MBA has argued that the proposed legislation, which passed the House Judiciary Committee in December, could add as much as 2 points to mortgage rates. Suggesting that bankruptcy should be a last resort for consumers, and not a “way out,” Kittle said the CRL was intentionally ignoring other loan workout options available to troubled borrowers. “Bankruptcy is a logistical and financial nightmare for consumers,” he said. “Filing for bankruptcy is expensive and approximately two-thirds of all bankruptcy plans fail. Nobody should be holding it out as a better alternative to working with your lender to try to find a mutually agreeable resolution.â€? For more information, visit http://www.mortgagebankers.org.
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