Changing Mortgages in Chapter 13’s–Is It Time?

Today’s Wall Street Journal (December 31, 2008) has a front-page story titled, “Mortgage ‘Cram-Downs’ Loom as Foreclosures Mount.” Discussed is the question of whether the new congress will allow “cram-downs” of residential mortgages in Chapter 13 and 11 cases.

A cram-down is where the terms of a mortgage are changed in bankruptcy. The interest rate can be lowered to market rate, principal can be reduced to the value of the property, and the loan term can be extended. Is this a new power bankruptcy judges are seeking? Hardly. For years, bankruptcy courts have done exactly the same things in commercial cases, and on houses that aren’t the sole security for a mortgage loan (such as vacation homes, or homes that are security for a business loan).

So why is it a problem now? Frankly, I’m not entirely sure.

Here is a way to stop foreclosures, restore the cashflow of monthly payments to mortgage lenders, and stop the constant downward pressure on housing prices caused by the glut of foreclosed homes on the market…ALL WITHOUT SPENDING A DIME OF THE TAXPAYERS’ MONEY! You’d think that people would be jumping up and down demanding that Congress pass it. And they should.

Related posts:

1. Mortgage Bankers Want Your Home, Not Your Money
2. Helping Families Save Their Homes in Bankruptcy – Mortgage Loan Modifications For Homeowners in Chapter 13
3. Chapter 13 Debtors Beware: Recurring Problems with Mortgage Companies – Part 3 Misapplied Monthly Payments