Mortgage Cram-Down Bill Gains Momentum in Congress

By: Scott D. Fink, Esquire

The on-again, off-again attempts to revise the Bankruptcy Code to allow for cram-down of first mortgage loans in Chapter 13 appears to be picking up steam, as the US House of Representatives has now introduced H.R. 7328 entitled “The Homeowners Protection Act of 2008.”  Of particular note in the Bill are provisions:

1.  Allowing for reduction of the claim on a first mortgage to the value of the home;
2.  Waiver of early payment or pre-payment penalties;
3.  Reduction and/or modification of adjustable interest rates to lower fixed rates; and
4.  Extension of repayment terms for a period of up to 40 years.

These provisions would be available to borrowers in Chapter 13 whose principal residence is subject to a notice of foreclosure.  While the Bill is being designed to attempt to stem the tide of foreclosures and distressed properties on the market, it remains to be seen what effect such provisions may have on the overall ability and willingness of lenders to make home loans going forward.  If enacted, lenders would be faced with a new level of risk to assess, and this increased risk may ultimately be passed on to borrowers in the form of higher interest rates and more stringent lending guidelines.
While we do not anticipate this bill to pass congress this term, we expect it will be a priority issue for the next administration. We will continue to monitor developments and provide future updates as circumstances warrant.

If you have any questions on this information, please contact Mr. Scott D. Fink, Esq. Scott is an associate in the Bankruptcy Department of Weltman, Weinberg & Reis Co., L.P.A. in Brooklyn Heights, Ohio. He can be reached at (216) 739-5644 or via e-mail at

Client Advisory is published by Weltman, Weinberg & Reis Co., L.P.A. , an organization providing comprehensive creditor representation.  The information contained in this advisory is a summary of legal information and is not intended to constitute legal advice on specific matters or create an attorney-client relationship.  Contact any of our offices or visit our website at for more real estate related information, company facts and attorney profiles. ©2008


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