House Committee Chairman Makes Cramdown Threat Again

House Financial Services Committee chairman Barney Frank, D-Mass., is threatening to attach a bankruptcy cramdown provision to a regulatory reform bill if servicers don't speed up the loan modification process. Rep. Frank said he is "disappointed" in the servicers' efforts to implement the Obama administration's Home Affordable Modification Program. But he noted there are legal obstacles such as second mortgage and servicing agreements that made modification decisions difficult. If the frustration over voluntary modifications continues to build, the chairman said, it will make it easier to pass a provision that allows bankruptcy judges to modify mortgages on a primary residence. "The best lobbyists we have for getting bankruptcy legislation passed are the servicers that are not doing a very good job of modifying mortgages. If they do not improve their performance then they improve the chances of the legislation," chairman Frank said. Mr. Frank previously has warned that a lack of progress on modifications could lead to more cramdown-related legislative efforts.