The Real Deal Miami

Mortgage cram-downs gain momentum

December 31, 2008 11:41AM

Mortgage cram-downs — in which bankruptcy judges have the power to
rewrite mortgages — are gaining momentum among lawmakers as other
foreclosure-prevention programs fail to stem the national tide of
foreclosures. In a cram-down, a judge can modify a loan, usually
reducing the principal to make it affordable for the borrower and
forcing the lender to absorb the loss. Judges currently have the power
to modify personal loans and vacation home mortgages, but not mortgages
on primary residences.