Comment by Alex McBride
Hurricane Katrina, an unprecedented cataclysm to an entire region and its people, lowered already-diminished public confidence in the government within days. The government appeared negligent, or at least incompetent, in ameliorating the suffering wrought by this American disaster. Common criticisms of the federal government and Louisiana's response included: a lack of adequate prestorm safeguards and contingency plans, a slow response in clearing New Orleans during the flooding, and a general lack of reconstruction aid. Yet one seemingly obvious critique was absent from this discontented zeitgeist against the state: Why had neither Louisiana nor the federal government facilitated the passage of a state law to suspend mortgages encumbering victims' homes as had been done in far less drastic circumstances?
The crisis at stake with regard to Louisiana residential property is staggering. A Brown University study conducted shortly after the storm concluded that eighty percent of the black population and fifty percent of the white population of New Orleans would be unable to return should the government fail to fundamentally improve its housing assistance to the poor. Such a loss would cut the population of the Crescent City by more than two-thirds, from a prehurricane level of 484,000 to about 140,000, potentially rendering a temporary dislocation of hundreds of thousands of people into a permanent diaspora. In spite of the hurricane's ferocity, thousands of Gulf residents, with lost jobs and damaged dwellings, may lose their homes not to the storm but to defaults on mortgages. Currently, no state or federal laws have been passed that supply mortgage payment relief to victims.
Perhaps the lack of state action to supply mortgage relief can be traced to the reemerging belief that the Contract Clause of the United States Constitution provides an absolute prohibition on state infringement of private contracts, such as mortgage agreements. The Clause reads: “No State shall . . . pass any . . . Law impairing the Obligation of Contracts.” Many contemporary scholars posit that federal courts have misconstrued the intent and meaning of the Clause since the early nineteenth century by reading it to actually permit some state interference with private contracts. Many argue that Contract Clause jurisprudence has swayed from a principled philosophy of an absolute right to private property to a pragmatic balancing of competing powers and interests. Others maintain that some mild reform is necessary in Contract Clause jurisprudence to render the Clause more powerful, but not absolute, in its prohibition.
Yet these academic critiques are outweighed by court precedents that have consistently shifted the meaning of the Contract Clause from an absolute interdiction of state interference to a balancing check against an otherwise unlimited state police power. Indeed, widespread cataclysms like Katrina are precisely the reason why Contract Clause jurisprudence has created increased room for the states to exercise their critical policing authority. As such, this Comment will show how the current meaning and scope of the Contract Clause in the United States and Louisiana Constitutions allows for sweeping mortgage moratoria for the benefit of mortgagors victim to Hurricane Katrina. It will specifically argue that the current humanitarian and economic crises in Louisiana call for, and that modern Contract Clause jurisprudence allows for, a state-imposed freeze on mortgage payments and foreclosures for a broad class of Katrina victims for perhaps years to come.
This Comment will progress from an expository and historical review of the Constitution's Contract Clause to an informed commentary on its proper application in the wake of Katrina. In Part II, it will begin by addressing the context in which the Contract Clause was written and ratified, amidst the anarchy and dislocations after the American Revolutionary War. It will then provide an overview of the Lockean political and social philosophies underwriting the Clause's creation. Finally, it will provide a condensed history of the Clause's drafting at the Constitutional Convention and subsequent ratification in the states.
In Part III, this Comment will address the history of Contract Clause jurisprudence. First, it will review early United States Supreme Court Contract Clause jurisprudence in the Marshall Court. It will then, in an historical leap, move into the Great Depression of the 1930s, when a seminal case radically altered the Clause's meaning and application. Part III will conclude by reviewing the modern judicial analysis of the contracts clauses in the U.S. and Louisiana Constitutions.
In Part IV, this Comment will, after briefly outlining the stakes involved in the wake of Katrina, explain why modern Contracts Clause jurisprudence can and should allow for drastic mortgage moratoria and, next, why states such as Louisiana should pass such a moratorium. Finally, it will propose and defend a “Louisiana Katrina Mortgage Moratorium Act,” which would give relief to Katrina mortgagors for perhaps years to come.
About the Author
Alex McBride. J.D. candidate 2007, Tulane University School of Law. Articles Editor, Tulane Law Review.
Citation
81 Tul. L. Rev. 1303 (2007)