Subprime Mortgage Crisis

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David Skeel
Professor of Law
University of Pennsylvania

Researches and teaches bankruptcy law, corporate law
Author of Debt’s Dominion: A History of Bankruptcy Law in America

“The most promising proposal to handle the subprime mortgage crisis is a small change to the bankruptcy laws proposed by Senator Richard Durbin. The Durbin proposal would let a borrower who files for bankruptcy reduce his or her mortgage to the value of the property if the property is now worth less than the mortgage. This would discipline lenders who made unwarranted loans and also provide an individualized solution to a homeowner’s financial crisis. Many troubled borrowers would never need to file for bankruptcy to get appropriate relief. The prospect of bankruptcy would encourage lenders to restructure these loans outside of bankruptcy, thus saving everyone the cost of bankruptcy.”