'Cramdown' Vote Delayed in House
The House has postponed a scheduled vote today on legislation that would have allowed bankruptcy judges to modify the mortgages of troubled homeowners, The Post's Renae Merle reports.
Under the provision, a judge would be able to lower the principal of homeowner’s mortgage and the interest rate and extend the terms of the mortgage, a process known as a “cramdown.” Judges are already allowed to do this for vacation rentals but not a borrower’s primary residence.
The measure faces fierce opposition from the financial services industry and some Republicans, who say it could lead to higher mortgage rates and wider losses for banks. Not to mention take a step toward threatening the concept of contract validity.
The provision is a key part of a housing package being put together by Congress to codify changes to housing policy called for by President Obama. It includes changes to Hope for Homeowners, a government program to refinance troubled homeowners into more affordable loans that has failed to gain traction.
The package also includes a provision to shield lenders from lawsuits by investors if they modify troubled mortgages.
The safe harbor provision has been called for by the industry.
February 26, 2009; 12:06 PM ET
Categories: The Ticker | Tags: cramdown, mortgage workouts
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