Friday, February 22, 2008

Mortgage Cram-Downs

With Michigan having one of the highest foreclosure rates in the country, it is worth getting your arms around some legislation currently moving through congress.

The proposed changes to the bankruptcy statutes would for the first time since the 1970's allow judges to change the terms of mortgages. What this means is that the judge could tell the lender that he is going to receive less each month.

There is even has a great word to describe it: the Cram-down. The judge crams the new terms down the bank's throat. Sweet.

The ability to restructure mortgages in bankruptcy proceedings was legislated away 35 years ago based on the banks' argument that this would allow them to offer more credit to home buyers at lower interest rates. Bank lobbyists are working overtime to kill the new legislation but it may be one of the few solutions that might actually help the housing situation.

You can read more at the always excellent Calculated Risk.

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