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March 6th, 2009

Cramdown bill heads to the Senate



Congress is still plugging away at a cramdown bill that would let federal judges shave the mortgage balance, lengthen the loan’s term, or cut its rate — or a combination thereof — of homeowners who have declared bankruptcy.

The bill known officially as “Helping Families Save Their Home Act” passed the House this week, but only after modifications that would put more of the burden on homeowners to prove they needed it:

Under the House bill, individuals must give lenders 15 days notice of their intention to file for bankruptcy, thus providing a narrow window for a lender to offer a lower interest rate or other terms. “(There’s) no requirement that the borrower accept” those terms, Talbott said.

The bill now goes to the Senate, where it faces an uncertain future; centrist Democrats, as well as Republicans, will seek further modifications that protect the lender’s interest.

We haven’t been quiet about the negative efects of cramdowns, and so far this bill hasn’t changed our minds.

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HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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