House Panel Marking Up Mortgage 'Cramdown' Bill
The House Judiciary Committee is debating a measure to allow bankruptcy judges to modify the mortgages of troubled homeowners, reports The Post's Renae Merle, watching the markup.
Under the legislation, a bankruptcy judge could change the terms of a loan by reducing its interest rate, extending its length or lowering the principal or loan balance, known as "cramdown" provisions. It is done over the objection of at least one creditor.
Committee Chairman John Conyers (D-Mich.) has proposed several amendments to the legislation. For example, if a judge lowered the principal owed, the homeowner would have to share the profit from any sale of the property with their lender for a set number of years.
"While bankruptcy reform may not provide all of the answers to this crisis, surely it provides a common sense and practical approach to helping stop the spiral of home foreclosures, which are not helping anyone," Conyers said.
After stalling for years, support for the change to bankruptcy law is gaining traction.
House Speaker Nancy Pelosi (D-Calif.) and President Obama have pushed the provision, and its proponents received another boost when Citigroup announced its support of the measure earlier this month.
Democrats have backed off efforts to include the provision in the economic stimulus package making its way through Congress. Now supporters are weighing other vehicles that would move the cramdown legislation quickly, while it also makes its way through the House as a stand-alone bill.
Banking executives privately acknowledge that some type of legislation is likely to pass, and are arguing that its scope should be limited.
But that point of view is facing stiff resistance from Democrats.
For instance, the committee voted down an amendment this afternoon offered by Rep. Trent Franks (R-Ariz.) to limit the legislation's impact to loans issued between January 2004 and December 2007, the height of the sub-prime era.
Frank's amendment would have also sunset the legislation after three years.
At least a dozen amendments are expected to be offered, and it is unclear whether the committee will complete debate on the measure today.
January 27, 2009; 4:33 PM ET
Categories: The Ticker | Tags: cramdown, mortgage workouts
Save & Share: Previous: Southwestern Virginia Volvo Plant to Lay Off 650 Workers
Next: Lineup Today: Housing, Fed
The comments to this entry are closed.