Cramdown Jam — Monday Critical
If weather doesn’t shut down the government on Monday, it’ll be an important day on Capitol Hill for housing. Debate over a measure that would give bankruptcy judges jurisdiction to modify the principal on home mortgages of home buyers who’ve hit a wall hit an impasse last week and Monday’s the moment for it to come to the fore for resolution.
The Huffington Post picked up this analysis of the issue on mortgage cramdowns from CNN.
The so-called cramdown provision could put pressure on loan servicers to modify mortgages before borrowers file for bankruptcy.
A major critique of the voluntary modification programs is that servicers aren’t doing enough to help struggling borrowers. But servicers will likely be more aggressive in working with homeowners if they know that the borrowers can turn to judges for relief.
“Reforming mortgage bankruptcy laws is the only remedy available that will provide the stick to go with the carrots that we have offered lenders to modify mortgages voluntarily,” said Rep. Brad Miller, D-N.C., who worked on the legislation.
But congressional Democrats, who first introduced a bill broadening judges’ power two years ago, are running into trouble gathering the support needed to pass the legislation. The House postponed a vote on the measure until early this week after a group of centrist Democrats voiced concerns. And its future in the Senate remains in doubt with many powerful Republicans strongly opposed to the legislation.
The House bill would allow judges to modify loans originated before the legislation’s enactment. It would let the courts change mortgage terms to make a loan more affordable, permitting judges to reduce the principal to the property’s market value, a step servicers loathe.
If it snows 12 inches in DC Sunday night, the deadline may get pushed back and more deliberation could illuminate the complexities of the issue for members of Congress.
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