"Don't Blame This Mess on Title 11"
By: Philip J. Giacinti Jr.
Procopio, Cory, Hargreaves & Savitch LLP; San Diego
"So, I say to myself, Self, things could be worse. And, sure enough!"
Don't blame the home mortgage mess on the Bankruptcy Code.
Section 11 USC 109 excludes insurance companies and "lending institutions" from title 11. Why? Because it is regulated under some other state and/or federal law.
Let's go back to 1968 and the Senate floor debate on the soon-to-be federal programs: the Mortgage-Backed Securities Program of the Government National Mortgage Association (GNMA) and the Home Loan Guarantee Program of the Veteran's Administration. Both programs were to encourage the investment of money to make home loans. The thought, at the time, was that money from such home loans would flood in if the investor's money was backed by the full faith and credit of the United States, (New York Guardian Mortgage Corp. v. Cleland, 473 F.Supp. 422, 424 (D.C.N.Y. 1979)).