Band of Senate Dems Pressure Obama on Cramdown
There remains some disagreement among finace experts over why lenders and servicers have been so reluctant to modify loans, even when foreclosures are often the more expensive option. One theory posits that the servicers will be paid more from foreclosures, even if the owner’s of the loans will lose out.
“As long as servicers profit because homeowners are in default, they’re not going to volunteer to take a hit,” Alys Cohen, an attorney with the National Consumer Law Center, testified Thursday.
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Mortgage Cram-Downs Stripped Out of Rescue Bill
Cram-downs are kaput in Congress.
Legislation to give bankruptcy judges the power to reduce home mortgage debt–by “cramming down” the principal–doesn’t appear to have enough votes and will be stripped out of a broader housing bill in the Senate.
The cram-down effort is a major plank of President Barack Obama’s housing rescue, which also offers financial incentives to mortgage servicers to modify loans and allows some homeowners with little to no equity to refinance.
The cram-down measure already passed the House of Representatives as part of the housing rescue. But it faced heavy opposition from the banking industry, and there were signals last week that Senate leaders might discard the measure from the housing bill.
