Tonight’s my monthly appearance on About the Money with Josephine Cheng, in which Josephine and I talk about debt consolidation. 7:30 pm on KCTS-9, repeating on Sunday morning at 10… check it out.

Major news from Massachusetts this week, with the state’s Supreme Judicial Court upholding an injunction forbidding Fremont Investment & Loan from foreclosing on borrowers to whom it had issued what the court judged to be predatory loans. As Adam Levitin observes at Credit Slips (emphasis mine):

The Massachusetts Attorney General had argued that “a lender’s failure to reasonably assess a borrower’s ability to repay his loan and the use of loan features that predictably lead to foreclosure is unfair and deceptive and in violation of Massachusetts law.” More precisely, a consumer loan that is not intended to be repaid, but intended to be refinanced (a process that can only work if property values rise indefinitely) is inherently predatory. By upholding the preliminary injunction, the SJC endorsed this view and imposed a serious good faith workout effort on Fremont.

The decision by the court to recognize as inherently predatory a class of loans that are designed to be all but impossible for the borrower to pay off as structured can’t be emphasized enough. It’s beyond reasonable doubt at this point that the final years of the housing bubble were powered by increasing numbers of teaser-rate mortgages, especially in the option ARM or “pick-a-payment” space, that were never intended to be repayable by the borrower after the reset period. Even borrowers who aren’t currently upside down on such loans may encounter difficulty refinancing their way out if credit remains as tight as it has recently; those that can’t refinance often find their monthly payments doubling or worse. If the Massachusetts SJC’s interpretation of what constitutes an inherently predatory loan catches on in other states it could mean relief for thousands of distressed homeowners.

I just discovered that KCTS provides embeddable video of About the Money segments, including the ones I’ve appeared in. Fun! Here’s the segment from November 18, where Josephine and I discuss debt collection practices:

And here’s the segment from October 14, where we discuss the housing crisis:

Given the times, the bankruptcy filing of a major communications company might perversely go all but unnoticed. Still, it’s worth our while to take a closer look at this one. Many of the reports this morning about the Tribune Company’s Chapter 11 bankruptcy have highlighted the precarious position of newspaper companies in an era of declining subscriptions and advertising revenue. But on the operations side, the Tribune Co. is actually very healthy: every one of the newspapers and television stations (including Seattle-area stations KCPQ and KMYQ) in its portfolio is profitable. The only reason Tribune had to file for bankruptcy is that Sam Zell, the real-estate billionaire who bought the company last year and serves as its CEO, saddled the company with $8 billion in debt as part of a heavily leveraged buyout in which Zell only put up 3 percent of the purchase price.

The analogy with the bursting of the housing bubble is hard to ignore: both are symptomatic of a financial culture that largely did away with traditional notions of risk in favor of a large-scale game of musical chairs in which all the players gambled that they’d be able to find a seat when the music stopped. Unfortunately, with every day that goes by there seems to be fewer and fewer seats to go around.

As I mentioned last month, I’m appearing each month on KCTS’s About The Money with Josephine Cheng. On tonight’s edition, Josephine and I talk about the laws governing debt collection and how to deal with collectors. About the Money airs each Tuesday at 7:30 PM on KCTS-9, and repeats on Sunday at 10:00 AM.

A pilot program currently under development could mean relief for distressed credit card borrowers:

Big banks have formed an unusual alliance with consumer advocates to urge the government to allow huge portions of credit card debt to be forgiven, a turnabout from recent years when the banking industry lobbied strenuously to make it harder for consumers to erase their credit card debts in bankruptcy.

The new pilot program — which the banks hope will become permanent — could involve as many as 50,000 people struggling with credit card debt. On an individual basis, the amount of debt to be forgiven would rise according to the severity of the borrower’s financial situation, up to a maximum of 40 percent.

It would have been nice if they’d come around to this way of thinking three years ago, but any relief is welcome, I guess.

Incidentally, if you’re wondering why the banks can’t just institute this program themselves without asking the government to get involved, it’s because they can’t:

Current government rules don’t allow lenders to offer repayment plans that reduce the amount of principal owed and borrowers to repay the balance over a period of several years. In cases where the principal can be reduced, under credit card settlements, borrowers normally are required to pay off the remainder over months rather than years.

From Bloomberg:

Former Federal Reserve Chairman Alan Greenspan said a “once-in-a-century credit tsunami” has engulfed financial markets and conceded that his free-market ideology shunning regulation was flawed.

“Yes, I found a flaw,” Greenspan said in response to grilling from the House Committee on Oversight and Government Reform. “That is precisely the reason I was shocked because I’d been going for 40 years or more with very considerable evidence that it was working exceptionally well.”

I know I said that blogging would resume several days ago, but these are hectic times for someone in my line of work, as you might expect, and I’m still catching up from my week off. For now, let me just mention that I will be appearing monthly on About the Money with Josephine Cheng on KCTS-9 to discuss bankruptcy, debt, and personal finance topics. My first segment, in which Josephine and I will be discussing (surprise!) the housing crisis, is due to air in tonight’s episode, which begins at 7:30. Enjoy.

A thousand pardons for not keeping up with all the eminently relevant things that have been going on in the financial world over the past few weeks, but I’m getting married tomorrow and the preparations have been taking up all of my blogging time. We’re off for a weeklong honeymoon on Sunday, so blogging will resume as normal on or about Monday, September 29.

Kerry Killinger, Washington Mutual’s CEO since 1990, was fired by the board of directors Sunday. The mortgage crisis, surprise surprise, was the culprit:

Critics charged WaMu put itself in an especially difficult position by its acquisition of a mortgage company that specializes in loans to people with poor credit histories. That segment, known as the subprime market, was the first in which problems appeared. WaMu also loaded up on other risky types of lending, such as option ARMs (adjustable rate mortgages), which allow borrowers to set their own payment, even if the result was that the principal actually grew from month to month. In addition, WaMu’s mortgage business is concentrated in hard-hit states such as California and Florida.

Weakness also is starting to show up in WaMu’s portfolio of more conventional home loans, as well as in home equity lines of credit and credit cards.