MBA Raps 'Cramdown' Provision of Bailout Bill

The nation's largest mortgage trade group says it is against a pending legislative provision that would allow judges to reduce or "cram down" outstanding residential loan amounts, arguing that it could set a judicial precedent that is not needed. In a statement released late Monday afternoon, Mortgage Bankers Association chief operating officer John Courson said the new government fund that will buy up to $700 billion in illiquid mortgage assets does not need judicial approval to reduce or rewrite the loan balance. Mr. Courson said the fund can do cramdowns without a judge's approval. He added that the cramdown is "really irrelevant to the current discussion. Once the fund purchases the distressed mortgages, it doesn't need a bankruptcy judge to rewrite the loan balance without Congress giving bankruptcy judges that authority."