Lenders including Bankers and Mortgagees have until now dictated the framework available to Homeowners to find solutions, other than Foreclosure, to their inability to repay their Home Loans. How is that going?
Citigroup reportedly has agreed to support amendments to the Federal Bankruptcy Laws to allow a limited authorization of so-called "cramdown provisions". Citigroup's support of these proposed amendments has irked Bankers and Mortgagees and other Lenders immensely. See, for example, Renae Merle and Binyamin Appelbaum, "Industry Recoils at Citi's Mortgage Deal/Banks Seek More Limits on Bankruptcy Judges' Authority to Rework Mortgages" (Washington Post.com, Saturday, January 10, 2009).
"Cramdown provisions" authorize Bankruptcy Judges to take certain actions, which reportedly include:
Lowering the interest rate on a loan;
Reducing the Principal; or
Extending the time over which the loan must be repaid.
See id. "Currently, judges are allowed to modify the terms of a mortgage for a second or vacation home but not a primary residence." Id. [Emphasis added.] Citigroup's support, however, concerns only existing mortgages and loans. Citigroup reportedly does not support -- and the proposed amendments do not provide for -- authorizing "cramdown provisions" for future mortgages. See id.
What if any effects such amendments would, if adopted, have on Insurance are open to speculation. It seems clear however that Premiums on Mortgage insurance Policies will be subject to change as well.
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