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Congressman Wants you to File Bankruptcy. PDF Print E-mail
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Representative Brad Miller (D-NC) was on Time Warner Cable's News 14 recently comparing mortgage brokers to used car salesmen and all things short of the anti-Christ.

I can't seem to locate a video or transcript from the interview, so I will reserve comments until it is available to make an accurate assessment. Everyone, even Washington politicians and used car salesmen deserve a fair shake.

However, my research did turn up this gem from April 2007, where Mr. Miller effectively calls subprime loans evil, and instead encourages homeowners who are facing financial hardship to file bankruptcy.

Representative Miller said:

More than half of subprime loans are not loans to purchase homes with, they are refinances. They are helping people who have gotten behind, who have had life’s rainy days. Only about one in ten subprime loans are to help first-time buyers. It is not about helping people get into home ownership. It’s about people who have had life’s rainy days. Someone in the family got sick, someone lost their job, they went through a divorce, they had to repair their home, they got in over their heads in credit card debt, they needed to borrow money against their home. That is the bulk of what we are talking about.

If you believe Representative Miller's figures, more than half of subprime loans are refinances helping people who are facing financial or credit problems. Representative Miller then goes on to suggest that these individuals file for bankruptcy, in lieu of refinancing their mortgage to get back on their feet.

According to recent numbers from the Washington Post, the foreclosure rate for subprime loans during the first quarter was 2.43%. To be fair, the number of subprime customers who paid their mortgage late (could be 15 days, could be 30 or 40) was almost 15%. This means that 97.57% of all subprimes loans are not in foreclosure and more than 85% are paid perfectly on time. Yet Representative Miller would prefer at least half of these people had filed bankruptcy instead of gone into their subprime loan.

Bankruptcy stays on your credit for 7-10 years. You can expect your credit score to drop substantially, to prevent you from obtaining credit, or cause you to get only the highest interest rates on credit cards and other loans for years to come. Bankruptcy will cause lenders to refuse to loan you money for a mortgage, including locking you out of most conforming/prime loans and subprime loans for years. Bankruptcy might even cause you to have to give up some of your personal property. Filing bankruptcy is akin to walking around with a scarlet B on your chest everyday, for seven to ten years. Whether getting a car, a cell phone, renting or buying a home, or even setting up utilities, bankruptcy will cause you to pay more money or be turned down for everyday items for years to come.

For the 97.57% of subprime borrowers who have not gone into foreclosure, and the 85%+ that have always made their payments on time... Brad Miller apparently would tell you tough. When you faced financial hardship, you should have instead filed bankruptcy and wrecked your credit for years to come, instead of taking responsibility and repaying your obligations.

In the south, when we here comments like that from "rich people" we call it "hogwash". What does Brad Miller know about a financial-rainy day? What does Brad Miller know about the mortgage business? Why does Brad Miller want to take away the only option hundreds of thousands of Americans (and many North Carolinians) have to repay their debts while maintaining their good credit score and good name?

Brad Miller doesn't understand or he doesn't care. The vast majority of subprime borrowers repay their debts on time, without trouble. The vast majority improve their situation so they can qualify for conforming/prime rate mortgage loans that were unavailable to them at the time of their purchase or refinance. To these people, Brad Miller apparently says its too bad... he wants their only option to be bankruptcy.

And, contrary to Brad Miller's statements, the vast majority of subprime brokers do help people. Mr. Miller, how many people have you helped lately?

Brad Miller's full comments from April 17, 2007 are available here.

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