In the past few years, Americans have seen little but a string of bad financial news reports. Unemployment has become a serious concern for many Americans, pay cuts and a lack of bonuses have slashed salaries, and sluggish markets have caused poor investment growth. For some, the cost of living has become unexpectedly high, and ultimately greater than they can handle. For these people, the law provides the protection of bankruptcy, offering multiple solutions for those who cannot keep up with their expenses. However, some Americans have been arguing for even more options and powers given to the courts. Specifically, some have called for cram downs to be legalized.
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A cram down, as it is often called, is an action taken up in bankruptcy court by the government to change the specifics of a primary residence loan. When dealing with mortgages, many citizens would be glad to hear that the government had the power to lower interest rates and provide for more consumer-friendly provisions. In supporters' eyes, cram downs provide a rational solution to the subprime mortgage problem, which could allow those caught up in these contracts to provide creditors with some payment as opposed to being completely unable to even address the costs of their loans.
As foreclosures have become a serious problem in the American home-owning landscape, the arguments for change can become heated. Against cram downs, financial industry leaders have noted that changing the value of a mortgage affects more than just the creditor and debtors involved. As mortgages can be bundled together into different investments, knowing the specific value is necessary. Cram downs make these values significantly more fluid, making it difficult to run these types of investment opportunities.
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