The cramdown legislation being fasttracked in Congress may cut back on the number of foreclosures in the country but the controversial proposal is already being opposed by bankers and lenders.  The bill allows bankruptcy courts to dictate the lender as to the total amount owed by the homeowner to the lender to prevent a foreclosure.  For example, you owe your lender $300,000 but the bank can tell your lender that since the property is only worth P$150,000 then that’s all you owe and need to pay to avoid foreclosure.

Once it becomes a law, the cramdown legislation will empower the courts to cram down or cut the interest rates as well as the monthly payments of the homeowners to suit his financial capability. However, borrowers have to use Chapter 13 or file for bankruptcy, make partial repayments to is creditors and agree to the court’s supervision when it comes to household expenditures for up to five years.

Democrats in both the Congress and the Senate have been pushing for the bill and now that they have the votes then there is a possibility it will be passed before the end of the month. This is why mortgage lenders and banks have started to howl “unfair” threatening to raise interest rates for future borrowers if the bill is passed.