As Cramdown Vote Nears, Negotiations Continue

Posted by Orb Staff on April 28, 2009 No Comments
Categories : Mortgage Servicing

long-awaited Senate vote on bankruptcy cramdown nears, one of the legislation's chief proponents, Sen. Richard Durbin, D-Ill., concedes that obtaining the necessary approval is still far from guaranteed. ‘I hope we can muster the courage and find the votes, although I know it will be hard,’ Durbin said in the Senate, [u][link=http://www.washingtonpost.com/wp-dyn/content/article/2009/04/27/AR2009042703776.html]The Washington Post reports[/link][/u]. ‘It's hard to imagine that today the mortgage bankers would have clout in this chamber, but they do.’ Durbin has been in talks with Bank of America, J.P. Morgan Chase and Wells Fargo to try to gain industry support for the bill. So far, Citigroup is the only large financial institution to have signed on to the proposal. The newest version of the bill limits the cramdown option to borrowers who are at least 60 days delinquent with an outstanding balance of less than $729,750, according to The Washington Post. Borrowers whose principal balances are reduced would have to share profits from home sales that occur while the borrowers are still in bankruptcy proceedings. In its current version, the bill would also prevent borrowers from receiving a court-mandated modification if their servicer has already offered them a modification in line with the Making Home Affordable (MHA) plan. Congressional Oversight Panel Chair Elizabeth Warren, who is tasked with monitoring the Troubled Asset Relief Program, has voiced concern over the limited aid provided to underwater borrowers by MHA. Cramdown laws "would be the one way to deal with principal that exceeds the value of the loan," [link=http://www.reuters.com/article/ousivMolt/idUSTRE53Q6T420090427][u]she told[/u][/link] the Reuters Global Financial Regulation Summit Monday. "Without that, we risk a foreclosure mitigation plan that is helpful in the areas of modest need, but not helpful where the problems are acute.’ SOURCES: Washington Post,

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