Keith Epstein: Banking Industry Lobbying Against Mortgage Cram-Downs ‘Right Now, As We Speak’
Keith Epstein: Banking Industry Lobbying Against Mortgage Cram-Downs ‘Right Now, As We Speak’
Today, BusinessWeek correspondent Keith Epstein explained that the banking industry is lobbying the Senate to narrow the scope of proposed mortgage “cram-downs” — a bankruptcy reform that would allow judges to “cram-down” mortgage payments for troubled homeowners:
There still is activity right now, as we speak, really focused in some ways on the Senate and on moderate Democrats, such as Evan Bayh in the Senate, to try to lessen the impact of what’s coming. The industry pretty much accepts that cram-down is coming…The work is now focused on trying to limit the number of people whose loans will be eligible for that.
Watch it:
This is an important development, because mortgage cram-downs will potentially be a key part of a new housing plan that President Barack Obama will announce tomorrow. As The Wonk Room has noted before, cram-downs are essential to addressing the foreclosure crisis, because they help to get around the problems caused by securitization — the fact that mortgages have been chopped up and sold to investors around the world.
Rampant securitizing means that “the creditors are split into mind-bewildering tranches of differently securitized investors who have no way, or desire, to reach an agreement” to prevent a foreclosure. As US bankruptcy judge Samuel Bufford said, “there’s nobody on the lender side to do the deal unless you [get permission] from investors, and that’s impossible.”
Cram-downs enable judges to cut through all the junk and renegotiate mortgage payments, hopefully enabling more owners to stay in their homes. This — and not banks’ worries about potential losses — should be foremost in the minds of those in Congress that the banking industry is targeting.
2 Responses to “Keith Epstein: Banking Industry Lobbying Against Mortgage Cram-Downs ‘Right Now, As We Speak’”
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These banks should remember who is paying to keep them operating. We had a ton of help from them getting this country into this mess. The American taxpayers are the only thing keeping those running these banks from living in a cardboard box. The absolute least they can do is help out those who helped them.
February 18th, 2009 at 4:18 pmPeople say that securitization means that the loans are so cut up and sold all over the world that it’s impossible to determine who the counterparties are to negotiate with. It’s impossible to know who actually OWNS these loans now.
I DON’T BUY IT. There were records kept for every one of those sales. And when Janey Homeowner writes her mortgage check every month, you know damn well the bank knows where to send the interest! That’s the whole point of buying mortgage backed securities anyway. No. This is all part of the scam, to continue the crisis so the disaster capitalists can extort more out of the US taxpayer, and strengthen their stranglehold on the common wealth.
February 19th, 2009 at 7:22 am