Republicans to fight “cram downs” in the Senate

Right now bankruptcy judges are allowed to “cram down” (reduce the principle) on second home mortgages, investment property mortgages, and even mortgages on yachts.  But they cannot touch the terms of a residential mortgage.

As we have often argued in these pages, allowing bankruptcy judges to adjust both principle and interest on these mortgages is the single best thing the government can do to prevent foreclosures.  Just the threat of bankruptcy can make lenders much more willing to negotiate if they think that a judge can reduce principle and interest on their loans.

A bill to allow this is making its way through the Congress with the support of President Obama, but the Republicans have vowed to use their right to filibuster to stop it in the Senate.  They don’t mind it when their friends “cram down” their vacation home and boat loans, but they think it’s terrible when people who want to have a place to live can file bankruptcy and get their mortgages adjusted.

Senator Linday Graham of S. Carolina has promised that “You’re going to see a lot of fighting on this.” 

If you have a Republican Senator in your state, now’s the time to let them know how you feel about yacht crams downs vs residential cram downs.


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