Wednesday, June 23, 2010

Scarberry's Reply to Levitin on Bankruptcy Modification of Home Mortgages

Mark S. Scarberry (Pepperdine) has posted a Reply to Adam Levitin's Response to Scarberry's Symposium Article (which was itself a "Critique"Levitin's work)--ok, I think I have that straight.  At any rate, it's a very interesting and important debate.  Scarberry's Reply is Mortgage Wars Episode V - The Empiricist Strikes Back (or Out): A Reply to Professor Levitin’s Response, and is published at Pepperdine Law Review, Vol. 37, p. 1277, 2010.  The abstract:

Professor Adam Levitin has responded to my recent symposium article critiquing proposed congressional legislation that would allow modification (including strip down) of home mortgages in Chapter 13 bankruptcy. A portion of my Critique criticized his empirical studies concerning the likely effect of the proposed legislation on mortgage interest rates and availability, and also criticized the arguments he has made in support of the proposed legislation. The Critique did note, however, that the insight involved in conceiving of such empirical studies was impressive.

Surprisingly, Professor Levitin’s Response fails to deal with the substantial case authority discussed in my Critique. He treats the Critique’s case authority on a critical question as if it consisted only of one relatively recent Ninth Circuit case and supposed dicta from an “old” Second Circuit case. But the Critique in fact relies on about twenty cases that deal with the question; the only supposedly contrary case authority he discusses in his Response turns out to be one of the cases cited in my Critique and not to be contrary at all. The case authority shows that the main defense put forward in his Response - that the mortgage modifications that would be permitted under the proposed legislation are similar to those permitted before the Supreme Court’s 1993 Nobelman decision and similar to those currently permitted where the collateral is not the debtor’s principal residence - is simply untenable.

It is also surprising that the entire weight of his defense of the empirical studies rests (A) on a very likely mistaken view of the law - that the law permits Chapter 13 debtors to use a novel, flawed approach in modifying secured claims under current law - and (B) on two remarkably bold and implausible assertions regarding how the market data he collected supposedly should have reflected the risk that debtors might use that novel, flawed approach, even though his data was collected before anyone had suggested that debtors might even try to do so. In addition, one of Professor Levitin’s assertions, if accepted, would fatally undermine
the design of a key part of his empirical studies.

The article notes in conclusion that law professors and others who have taken divergent positions on the wisdom of the congressional proposals might yet be able to agree on a common-sense middle ground; there is no need to consider those who disagree with us as having been seduced by the Dark Side.

The citation for my Critique is Mark S. Scarberry, A Critique of Congressional Proposals to Permit Modification of Home Mortgages in Chapter 13 Bankruptcy, 37 Pepp. L. Rev. 635 (2010). The Critique is available at http://ssrn.com/abstract=1520794. The citation for Professor Levitin’s Response to the Critique is Adam J. Levitin, Back to the Future with Chapter 13: A Response to Professor Scarberry, 37 Pepp. L. Rev. 1261 (2010). His Response is available at http://ssrn.com/abstract=1534912. The citation for this Reply is Mark S. Scarberry, Mortgage Wars Episode V - The Empiricist Strikes Back (or Out): A Reply to Professor Levitin’s Response, 37 Pepp. L. Rev. 1277 (2010). 

I appreciate Prof. Scarberry including the citations to the other articles in the debate in his abstract--saves me a lot of work!  More importantly, this dialogue addresses one of the key issues in the mortgage crisis.  

Matt Festa
 

http://lawprofessors.typepad.com/land_use/2010/06/scarberrys-reply-to-levitin-on-bankruptcy-modification-of-home-mortgages.html

Federal Government, Financial Crisis, Housing, Mortgage Crisis, Mortgages, Real Estate Transactions, Scholarship | Permalink

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