Last week many of you received my real estate newsletter. In it I had some of the programs that are coming out of the Obama stimulus plan. I received many inquiries as to what a “cramdown” was, based on this section:
Foreclosure Relief
Those who are “upside-down” on their mortgages (owing more than the property’s value) will have the opportunity to refinance into low rates currently available. For those who have less than 20% equity and owe up to 5% more than the home’s value, a conforming loan program will soon be available for those who have been responsible and maintained payments/credit worthiness. Other loan modification programs will also soon become available that could offer the ability to “cram-down” the principal balance owed.
Well here it is:
A “cramdown” allows bankruptcy judges to alter the terms of a mortgage if no other options remain for homeowners, this can be the length of term (40 year amortization versus 30 year), interest rate or principle balance.
Here is a good article that talks to other apsects of mortgage rewrites.
