Mortgage 'Cramdown' Idea Alive Again

Senate Banking Committee chairman Christopher Dodd, D-Conn., said he will try to pass a change to bankruptcy laws during the lame-duck session that would allow a judge to restructure a mortgage on a primary residence in foreclosure. At a committee hearing, Sen. Dodd indicated the bankruptcy change would be temporary - possibly three to five years - but is necessary to deal with the nation's foreclosure crisis. Wells Fargo Bank executive vice president Jon Campbell warned that investors would likely demand higher downpayments and pricing on home loans to offset cramdowns. Sen. Dodd said he has heard arguments that such a bankruptcy change would affect credit availability for primary residences. "But I just don't see the evidence of that," he said, stressing that cramdowns would be temporary. Congress returns on Monday to consider a stimulus package that would bailout the auto industry. Some observers expect the legislative session will continue into December but note it's impossible to predict if anything will pass in a crisis environment.