New article: Ariel Olson, Kicked While They’re Down: Deficiency Judgments and the Great Recession, 67 Emory L. Rev. 1273 (2018). Abstract below:
In the District of Columbia and forty-two states, if a borrower defaults on her mortgage payments, the lender may be able to take more than just her home. If the foreclosed property sells for less than the total amount of outstanding debt, the lender can file a claim for the outstanding balance to obtain a deficiency judgment.
When the economy is in crisis and housing prices are depressed, deficiency judgments can reach hundreds of thousands of dollars. Lenders can wait to collect these judgments until interest has accrued, further increasing the hardship on the defaulting borrower. For most borrowers who default because they can no longer afford their loans, a deficiency judgment is unmanageable—their only option is to file for bankruptcy.
State legislatures enacted various forms of anti-deficiency laws after the foreclosure crisis of the Great Depression, with the goal of protecting borrowers from losing their homes and being forced to file for bankruptcy by deficiency judgments. However, fewer than ten states currently have laws that achieve this goal for all residential borrowers who default due to financial hardship.
Although some scholars argue that prohibiting deficiency judgments will lead to increased strategic default by borrowers who still have the financial resources to make their monthly payments, several recent studies discount this hypothesis. The ability of lenders to predict and protect themselves from losses related to borrower default, as well as the increase in predatory lending practices leading unsuspecting borrowers to take out unsustainable loans, necessitate a legislative response. This Comment argues that states have a valid interest in protecting their citizens from financial ruin—and in encouraging recovery over punishment—and should enact legislation prohibiting deficiency judgments for residential borrowers.
News Coverage: Mary Williams Walsh, Millions of Carolina Homes Are at Risk of Flooding. Only 3350,000 Have Floor Insurance, NYTimes.com, Sept. 21, 2018.
“The math is simple, and the result is ugly: Many people affected by the storm are going to have to pay for repairs to their damaged homes out of their own pockets.
If that sounds familiar, it’s because the same thing happened last year after Hurricane Harvey flooded Houston and, to a lesser extent, after Hurricanes Irma in Florida and Maria in Puerto Rico.”
News Coverage: Umair Irfan, Ryan Zinke to the oil and gas industry: “Our government should work for you”, Vox.com, Sept. 21, 2018.
The interior secretary’s latest gaffe was a pledge of allegiance to fossil fuels.
News Coverage: Deborah B. Solomon & Mikayla Bouchard, 8 Ways the Next Round of China Tariffs Could Pinch Consumers, NYTimes.com, Aug. 21, 2018.
New Article: K. Sabeel Rahman, Constructing Citizenship: Exclusion and Inclusion Through the Governance of Basic Necessities, Columbia L. Rev. Vol. 119, Forthcoming (2018). Abstract below:
While income inequality has become an increasingly central focal point for public policy debate and public law scholarship, systemic inequality and exclusion are produced not just by disparities in income but rather by more hidden and pernicious background rules that systematically disadvantage and subordinate constituencies. This paper focuses on a particularly crucial — and often underappreciated — site for the construction and contestation of systemic inequality and exclusion: the provision of, and terms of access to, basic necessities like water, housing, or healthcare. We can think of these necessities as “public goods” in a broader moral and political sense: these are foundational goods and services that make other forms of social, economic, or political activity possible, and thus carry a greater moral and political importance. This paper argues that the way in which we administer these essential public goods represents one of the major ways in which law and public policy constructs systemic forms of inequality and exclusion. Conversely, the paper also argues that promoting equality and inclusion requires a more inclusionary approach to the administration of these public goods.
In Part I the paper develops the central theoretical argument that the provision of and access to basic necessities constitutes a central vector for structural inequality and exclusion — and more broadly, for the moral ideals of inclusion, equality, and citizenship itself. The importance of these public goods makes communities subordinate and vulnerable to those actors that can exert control over these goods. This normative critique parallels historical efforts to secure greater economic and social citizenship in part by contesting the power of actors that control infrastructure, from the Progressive Era fights over public utilities to civil rights battles over public accommodations. Part II then identifies three specific patterns of structural exclusion produced through the maladministration of these public goods: bureaucratic exclusion, fragmentation, and privatization. These three strategies are more subtle than direct denial of access; they represent a kind of “second-order” exclusion operating through background rules of governance and administration. Part III then imagines what a more inclusionary governance regime built to prevent these more subtle forms of exclusion would look like. Here the paper identifies three particular strategies for inclusionary administration of public goods: expanded enforcement authority; greater governmental accountability; and direct public provision.
Finally, Part IV of the paper links this exploration of structural inequality, exclusion, and public goods to broader debates in public law scholarship. First, this focus on public goods represents an important application and extension of the recently renewed interest in inequality and “constitutional political economy,” suggesting a concrete legal and institutional context in which the normative ideas and historical narratives developed in this literature can have purchase. Second, the focus on public goods also provides greater weight and context to current debates over the “deconstruction” of administrative agencies, particularly in context of economic inequality and racial and gender exclusion.
Posted in Access to Justice, Articles, Consumption / Consumer Protection, Criminalization of Poverty, deserving/undeserving, Development (and Law), Health, housing, Inequality, Legal Academia, Measuring Poverty, Socio-Economic Rights
News Coverage of Poverty: Tara Siegel Bernard, ‘Too Little, Too Late’: Bankruptcy Booms Among Older Americans, NYTimes.com, August 5, 2018.