Mortgage "Cram Down"
The Making Home Affordable Refinance & Modification Program is poised to start letting bankruptcy judges wipe out some mortgage loan debt. Experts say this will help bring down foreclosure rates by 20% and steady the turbulent real estate market. We say if 20% are aloud to wipeout most of their mortgage debt, then by god open that possibility up to every tax paying American.
The possibility that judges will now have the power to erase mortgage debt, or 'cram down' a mortgage loan with the new makinghomeaffordable.gov Refinance Program will give mortgage lenders a reason to alter more failing mortgage loans on their own.
We are expecting the new bankruptcy reform along with the makinghomeaffordable.gov refinance and modification program to increase mortgage loan modifications, especially principal reduction modifications, as it is expected to both pressure lenders and also give mortgage lenders a solid reason to actively pursue principal mortgage reductions.
This will almost assuredly send all major mortgage lenders back to the federal begging table for more money because they are all to big to fail.
The three-year-old housing downswing has pushed foreclosures to record numbers as more families struggle to make mortgage payments on homes that have a value which continues to disappear almost daily.
Numerous bad mortgage loans were bundled by Wall Street into complicated securities that are troublesome to alter and continue to devastate Main Street.
Advocates for the mortgage cram-down and Making Home Affordable programs contend that bankruptcy judges are uniquely capable of cutting through mortgage contracts and rewriting mortgage loan terms.
We believe that redrafting the federal bankruptcy rules will frighten more mortgage lenders away from the real estate market, causing interest rates to rise and damaging banks who specialize in doing mortgage second-liens, because it will be so very easy for bankruptcy judges to now wipe out the banks second lien. Both of these reason along with the new fee mortgage lenders will charge in the future to help cover losses from this bill will likely further destabilize home values.
Millions of troubled homeowners will be tempted to bypass the makinghomeaffordable.gov programs and try to go directly to bankruptcy as this would theoretically be a permanent solution to their loss of equity and mortgage payment problems, and more federal bankruptcy filings will mean billions more in write-offs across the financial sector.
With an increase in bankruptcy filings expect to see a huge surge in credit card losses, as lenders are required by law to charge off the account upon receipt of the bankruptcy notice.
2009 Housing Nightmares
