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by liber8
1397 days ago
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If a lender is facing bankruptcy, how are they going to fund the infrastructure necessary to negotiate with tens of thousands of borrowers? If a lender is not yet on the brink of bankruptcy, but sees it coming, don't you think if this was a viable business model for a lender to avoid liquidation they would pursue it? Your proposed law wouldn't even make life easier for anyone but the richest debtors, who don't need a law to protect them. The vast majority of people live paycheck to paycheck and have de minims savings. If you offered them a 30% discount to pay off their mortgage (or even a 50% discount), they have no way to come up with that payment without going out and obtaining another loan. |
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B) It's not really necessary to consider how the lender will fund the infrastructure necessary to comply with the law. That's sort of how laws work. If you want to operate in that space, you have to obey the law or not operate in that space. Either they will stay in that business or they won't. What is necessary to consider is the secondary effects of that decision, which would likely be decreased access to credit for borrowers with marginal credit. Might be OK, might not.
C) RE: whether it's a viable business model, see above.
D) RE: benefiting richer debtors proportionally more than poorer ones, that's relatively easy to handle - we have all kinds of policies that are targeted to benefit one economic class over another. Most of them are tuned to help the richest, but there are plenty tuned to help the poorest or the middlest. It's not a problem so long as we build in the correct dials to tune those parameters.
E) RE: unavailability of credit to low-income debtors to take advantage of this scheme - I have no doubt that new enterprises would form to take advantage of this economic niche. It might be higher risk, and come with a somewhat higher rate, but it might be viable to make a marginally risky $40,000 loan where it would not be viable to make that same loan at $100,000, particularly if the loan was secured by the property. That is in effect already happening, it's just the bank buying the loan from another bank that gets the benefit.