Dems Limit Scope of ‘Cramdown’ Bill

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In key concessions to the banking industry, Mr. Conyers agreed to alter the legislation to allow court-ordered modifications only for existing mortgages and to require that borrowers contact their lender at least 15 days before filing bankruptcy. Citigroup Inc. had demanded the changes in exchange for throwing its weight behind the bill, a move that angered the rest of the industry.

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In another change, the legislation will now require recipients of cram downs who resell their home within five years to share the proceeds with their lender.

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The panel also added language dissuading bankruptcy judges from shrinking the principal amounts of mortgages guaranteed by the Federal Housing Administration, the Veterans Administration or the Department of Agriculture. Under current law, the government cannot guarantee or insure amounts that have been crammed down on such loans.

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I’m in favor of it [cramdown] because I think it will be part of a range of regulatory and legal changes that will help prevent future borrowers from getting into a lot of jams, which is to say that it will … actually help “stabilize” the residential mortgage market in the long term. Any industry that wants special treatment under the law because of the socially vital nature of its services needs to offer socially viableservices, and since the industry has displayed no ability or willingness to quit partying on its own, then treat it like any other partier under BK law.