What Happened to Cramdown in Bankruptcy?

Yes, the Obama folks are looking for new ways to stop the erosion of the economy caused by the real estate bubble, and this short sale idea has some merit, but the better solution is to bite the bullet and amend bankruptcy statutes to allow judges in bankruptcy court to change the terms of the mortgages. This would allow homeowners to remain in their homes with payments based on their real values. It would cost the banks money, so banker bonuses could suffer, but hey, they made stupid loans, based on short term profits, commissions, and the ability to bundle and sell their stupid loans as if they were solid investments, the bankers should be relieved they are not going to jail on fraud charges. What are the chances of that?

clipped from www.nytimes.com Program Will Pay Homeowners to Sell at a Loss In an effort to end the foreclosure crisis, the Obama administration has been trying to keep defaulting owners in their homes. Now it will take a new approach: paying some of them to leave. This latest program, which will allow owners to sell for less than they owe and will give them a little cash to speed them on their way, is one of the administration’s most aggressive attempts to grapple with a problem that has defied solutions. More than five million households are behind on their mortgages and risk foreclosure. The government’s $75 billion mortgage modification plan has helped only a small slice of them. Consumer advocates, economists and even some banking industry representatives say much more needs to be done.

This entry was posted on March 8, 2010 at 10:40 am and is filed under News, Politics, Connect the Dots. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response or trackback from your own site.

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