Bankruptcy Judge Option: Lower Principal

Fri, Jun 19, 2009

Cram-Down Program, Government Programs

Known colloquially as the “cram-down” option, the Obama administration had surfaced this idea as a means for bankruptcy judges to allow people to keep their homes. The program was intended to confir the power to lower the principal owed on a home loan down to the now-prevalent market value, thereby recalculating the monthly mortgage payment based on a lower loan value. In cases where a person would become financially viable if they had little or no consumer debt and a lower house payment, they would be able to keep their home. This program has met with consistent opposition from banks and from investors who purchased the collateralized debt obligations (CDOs) and derivatives formed from bundles of mortgages, as it would lower the value of the asset they own. The program is currently not enacted.

One Response to “Bankruptcy Judge Option: Lower Principal”

  1. Patti Morgan Says:
    July 29th, 2009 at 9:07 am

    is there an update to this program…has it been enacted yet…what is it’s status?


Leave a Reply