What is this “mortgage cramdown” you keep hearing about, and why is it potentially so helpful?
Mortgage cramdown refers to a proposed new law that would enable bankruptcy judges to “cram down” the principal of a home loan to the current market value. In other words, if your home is underwater and you file for bankruptcy, the bankruptcy judge could reduce the actual amount of the loan to reflect the market value. The result would be that the homeowner would then have a more realistic and reasonable loan amount to pay and could keep their home.
(See this recent BAPCPA Man vs Mortgantua cartoon for a good visual illustration of the cram down.)
Currently, a judge is not allowed to cram down a home loan. Kind of strange when you think about it since it is perfectly acceptable in bankruptcy for a judge to cram down a commercial real estate loan. Why the discrepancy? Because the mortgage industry used its influence to include that rule when the bankruptcy law was created.
Now, however, it’s clear that the foreclosure crisis isn’t going away. That the Obama Administration’s Making Homes Affordable is not the one-stop solution. And that more proactive measures are necessary to really help Americans and to really help the American economy as well.
Keep watching this blog for future developments on mortgage cramdown.
In the meanwhile, the Nevada Foreclosure Mediation Program is still the strongest anti-foreclosure tool out there. So if you’re facing foreclosure in Las Vegas and are considering options such as mandatory foreclosure mediation to try to negotiate a loan modification, then get in touch with us for a free foreclosure consultation.
There’s a lot going on these days with foreclosure and bankruptcy. And it’s important to have good Las Vegas bankruptcy attorneys whom you can trust to provide you with the Las Vegas bankruptcy information you need to get back on your feet.