Congress Expected To Reach Compromise On “Cramdown” Legislation
March 4, 2009
Democrats in the House of Representatives, under pressure from a group of moderates in their ranks and the banking lobby, agreed to restrictions on legislation that would give bankruptcy judges the power to change the terms of a mortgage by the reducing interest rate or principal.
The legislation, which the House could vote on by Thursday, will require the judge to consider whether a homeowner had been offered a reasonable deal by the bank to rework his or her home loan before seeking help in bankruptcy court. It also puts the responsibility on borrowers to prove that they tried to modify their mortgages.
The measure is another piece of President Obama’s plan to stabilize the housing market and reduce the number of foreclosures. It follows several initiatives aimed at getting banks to modifiy mortgages for distressed homeowners who are in danger of losing their homes.
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