Mortgage Cram-Downs Back on Legislative Agenda

Well, it looks like cram-downs, the ability of bankruptcy judges to rewrite the terms and the principal in mortgages for primary residences is back on the table. (A copy of the article that does not require registration is here)

They can already do this for rental properties, and for the vacation homes of rich folks, but for your home, it has been prohibited by law since (IIRC), the late 1970s, because it was argued that the mortgage industry was heavily regulated, so cram-downs were unecessary….Yeah…I know.

The problem now is that many of the worst mortgages cannot be modified because they are held by dozens, if not hundreds, of people, any of whom could sue if they did not like the terms of a voluntary readjustment of a mortgage.

Additionally, this gives lenders a real incentive to negotiate in good faith, and allows the bankruptcy judges to move against the insane fees that are charged by some mortgage management companies.

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