Congressman Conyers argues for reconsideration of mortgage ‘cramdown’ provision

[Better Believe It]

Conyers argues for reconsideration of mortgage ‘cramdown’ provision
As cities sue predatory lenders, bill would allow bankruptcy judges to rewrite mortgage terms
By Eartha Jane Melzer

Voluntary loan modification programs are not saving people from losing their homes to foreclosure, U.S. Rep. John Conyers Jr. of Detroit told a House panel, and the problem is acute in the Detroit area where 195 Wayne County homes are entering foreclosure each month.

“I recently learned about the case of Paula Thomas from my hometown of Detroit,” the veteran Democratic lawmaker told the House Judiciary Subcommittee on Commercial and Administrative Law. “Ms. Thomas was behind two months on her mortgage when she lost her home to foreclosure. It was purchased for $864 by a Florida investor.”

Conyers said people are needlessly losing their homes because their loans are being packaged and resold in ways that make it nearly impossible to modify mortgages.

“The financial services industry insisted it would voluntarily modify mortgages to help homeowners avoid foreclosure. This has not happened. Ms. Thomas sought to modify her mortgage and, like most in her situation, the loan servicer failed to help her save her home from foreclosure. It is time for Congress to finally pass my mortgage modification bill, the Helping Families Save Their Homes in Bankruptcy Act, and level the playing field for homeowners in distress.”

Conyers’ bill would allow bankruptcy judges to rewrite the terms of mortgages, a process known as “cramdown.”

U.S. Rep. Barney Frank (D-Mass.), who chairs the Financial Services Committee, and U.S. Senate Whip Richard Durbin (D-Ill.), echoed Conyers call for renewed focus on cramdown legislation during the hearing.

Please read the complete article at:

http://michiganmessenger.com/26166/conyers-argues-for-reconsideration-of-mortgage-cramdown-provision

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Durbin gives bailed out banks ‘cramdown’ ultimatum
Senate Democrat threatens to bring back bankruptcy law change
By Mike Lillis 8/4/09

WASHINGTON — A top Democrat on Monday warned the nation’s banks that, unless they get more aggressive in modifying mortgages to prevent foreclosure, Congress will renew previous efforts to empower families to keep their homes through bankruptcy. But U.S.Sen. Richard Durbin (Ill.), the upper-chamber’s second-ranking Democrat, also gave the banks three months to comply with his ultimatum — a span over which roughly 1 million new homeowners are projected to enter foreclosure.

Congress and White House officials have created a series of programs designed to entice mortgage lenders and servicers to modify troubled loans voluntarily, but those efforts haven’t kept pace with an ever-rising number of foreclosures, which have already topped 1.5 million since January. The issue has plagued lawmakers, who have spent hundreds of billions of dollars propping up the nation’s banks, but have provided little in direct help for families caught in the swirl of the housing crisis, which was at the root of the current recession.

http://michiganmessenger.com/24242/durbin-gives-bailed-out-banks-cramdown-ultimatum

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Obama administration abandons foreclosure cramdown
As voluntary foreclosure programs flounder, White House steers clear of forcing lenders' hand in bankruptcy
By Mike Lillis 7/17/09

WASHINGTON — As housing foreclosures top the 1.5-million mark this year, the Obama administration has openly abandoned cramdown as a strategy for tackling the crisis.

That approach — which would empower homeowners to avoid foreclosure through bankruptcy — was once a central element of the administration’s plans to stabilize the volatile housing market. Some financial analysts say the strategy would prevent 20 percent of all foreclosures. But, appearing before a Senate panel Thursday, two White House officials said that current policies are enough to address the problem.

“We have enough tools,” Herbert Allison, the Treasury Department’s assistant secretary for financial stability, told members of the Senate Banking Committee. “The challenge is to roll them out.”

The tools Allison invoked are several federal programs that offer financial incentives to mortgage lenders and servicers — the companies that buy the rights to manage loans — to modify the terms of mortgages in efforts to help homeowners escape foreclosure. Yet those programs rely largely on the cooperation of the finance industry to alter the loans voluntarily. Many lawmakers and consumer advocates argue that the companies aren’t doing enough to comply with the modification programs. The carrots without a strong stick, they say, just aren’t working.

It wasn’t supposed to work out this way. When the Obama administration unveiled its Making Home Affordable program in February, it estimated that the initiative would entice servicers to modify loans helping between 3 million and 4 million families keep their homes. To date, 325,000 modifications have been offered under the program, according to Allison. Of those, 160,000 are currently in a three-month “trial-modification” period. If borrowers prove they can meet the terms of the modifications over that span, then the changes become permanent.

Please read the complete article at:

http://michiganmessenger.com/23065/obama-administration-abandons-cramdown

[autorank]

1. National Cram Down

Time for a Nationwide "Cramdown"

The easiest solution, the most immediate, is a cramdown. What's that?

In bankruptcy court, a judge can take the total amount of a mortgage and divide it into two parts. The appraised home value becomes the "secured claim" and "the amount over the current appraised home value" becomes the "unsecured claim." The unsecured amount is discarded. The secured amount, i.e., current appraised value, becomes the homeowner's only debt. This debt can be amortized over the life of the loan. Thus monthly payments go down, people have a much better chance of staying in their homes, and they have some disposable income for essentials. Link

Congressional Democrats and President Obama are arguing over legislation that would give bankruptcy judges greater options for "cramdowns." Both sides of the argument are out of touch with the accelerating harsh realities of the U.S. economy as experienced directly by the citizens.

There's no court that needs to hear this case. The nationwide cramdown should be negotiated directly by the Obama administration, in behalf of all citizens and the remaining banks. Obama's two financial system insiders, Treasury Secretary Timothy Geithner and chief economic advisor Larry Summers, would all of sudden become the good cop - bad cop negotiators shoving the banks in a corner and forcing them so submit to the plan. Feb 8, 2009 http://www.scoop.co.nz/stories/HL0902/S00147.htm

[Better Believe It]

2. Only 38 Democrats voted for "cramdown" when President Obama abandoned cramdown advocates

I believe that was the Senate vote on a cramdown amendment. Let's hope that President Obama doesn't abandon homeowners again such new cramdown legislation come up for a vote.