Homeowner 'Cramdown' Legislation Opposed By Obama
If they go bankrupt, real estate investors who don’t live in the homes they purchase can ask a judge to reduce the principal balances on their mortgage loans.
But homeowners don’t have the same “cramdown” right concerning their primary residence, under recent bankruptcy reform legislation. Unless the lender voluntarily agrees to reduce the principal balance, they must either find a way to pay what they owe (perhaps under modified interest terms) or, sooner or later, lose their homes, according to a lengthy Center for American Progress article about the current housing crisis.
In the wake of a growing tsunami of mortgage foreclosures across the nation, federal lawmakers recently proposed that economic stimulus legislation include a provision that would give bankruptcy judges the power to reduce principal balances for homeowners. However, that provision is opposed by President Barack Obama, reports the Hill, likely putting it on a slower track than advocates had hoped for.
Obama “committed to dealing with the [cramdown] issue after the bill passes, as did House Speaker Nancy Pelosi (D-Calif.),” the article says.
Earlier ABAJournal.com coverage:
Big Lender OKs Plan to Let Bankruptcy Judges Reduce Mortgage Balances
