New York Fed Research Links Bush Law to Increase in Foreclosure Rate

http://www.newyorkfed.org/research/epr/forthcoming/1102morg.pdf

This study by the NY Fed shows that changes in the bankruptcy law during the Bush administration made it difficult for households to use bankruptcy protection to reduce their unsecured credit card debt. Banks, however, had the power to retroactively raise interest rates on credit card debt as a penalty for late payment. Their research indicates that the inability to use bankruptcy protection on unsecured debt caused defaults on secured mortgage debt. The increased rate of foreclosures contributed to lower housing prices and led to even more foreclosures as more mortgages went "under water".