Proponents of mortgage "cram downs" got a lift yesterday when a House committee voted to pass a measure that would allow bankruptcy judges to alter the terms of mortgages on primary residences. Supporters argue that giving bankruptcy judges this authority would help stem the foreclosure crisis.
From The Washington Post:
Debate on the measure fell mostly along partisan lines with several Republican amendments proposed to curb the impact of the bill, including limiting it to subprime mortgages or other types of risky loans. That amendment failed.
The committee agreed that if a judge lowered the principal owed, the homeowner would have to share the profit from any sale of the property with their lender. The panel also approved a Republican amendment excluding people who have committed mortgage fraud from receiving such modifications.